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How to Convert the Country to Natural Gas, by T. Boone Pickens

Photograph by Matt Rainwaters for Bloomberg Businessweek

April 11, 2013
By T. Boone Pickens

It starts with getting into the transportation sector. When I started the Pickens Plan in 2008, there were about 200,000 vehicles on natural gas in the world; now there’s about 16 million. That growth’s coming from everywhere but the U.S. Places like Iran and Argentina. China’s already got 40,000 trucks on LNG [liquefied natural gas], and they import the stuff. And here we are in the U.S., with more natural gas than any other country in the world, and we aren’t doing a thing about it. It’s just amazing to me that these dumb f-‍-‍-s in D.C. don’t see this opportunity and try to capitalize on it.

The best thing to do is focus on heavy-duty trucks and give them a tax credit. It could work like a toll road, what you call a pay-for system. If you use it, you pay for it. So you give these guys a break upfront to convert to natural gas trucks, and then you tax the natural gas.

You don’t put natural gas in your corner gasoline station. You put natural gas in a truck stop. It’s a fuel that competes against diesel. There are about 8 million heavy-duty trucks in the U.S. If you convert them to natural gas, that boosts consumption by about 15 billion to 20 billion cubic feet a day. Right now we do about 70 billion cubic feet a day. So that extra demand would immediately boost the price and get drills moving again. Today natural gas is about $2.79 a gallon, compared with about $4.79 for diesel. That’s a huge advantage. But here’s the thing: If you take natural gas from about $4 (per thousand cubic feet) to $6, you only increase it by about 28¢ a gallon. So it’s cleaner by 30 percent and still cheaper by almost a half.

Pickens is founder, chairman, and CEO of the hedge fund BP Capital. As told to Matthew Philips

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Corpus Christi, TX: Apache to Add CNG Gas Fuelling Dispensers at Midland Stripes Stores

Stripes LLC, a subsidiary of Susser Holdings Corporation announced it is partnering with Apache Corporation to add natural gas fueling dispensers at selected Stripes® convenience store locations.

Initially, compressed natural gas (CNG) fueling capability will be available at two Stripes locations in the Midland, Texas area.

Steve DeSutter, Stripes President and CEO Retail, said, “Adding natural gas to our conventional motor fuel products reinforces our mission to give Stripes customers what they want at a great price in our convenient store locations.

“We certainly see the role of natural gas in our energy future, and we are looking forward to participating as it evolves as a viable alternative transportation fuel. We plan to evaluate the results of our pilot project in West Texas, and if it is successful, we expect to gradually roll out CNG fueling capabilities in other Stripes markets,” DeSutter said.

Steve Farris, Apache’s Chairman and Chief Executive Officer, said: “Natural gas discovered and produced in the United States is a smart alternative to conventional fuels. It’s cheaper, cleaner, and abundant.

“We use it for our fleet cars and trucks with great results, lowering operating costs and reducing our environmental footprint. Partnering with Stripes provides our fleet and other CNG users with a more convenient fueling experience as well as access to their stores and other amenities.”

Today compressed natural gas is priced 30% to 40% lower than gasoline or diesel on a gallonequivalent basis, which means a big savings at the pump. According to industry experts, natural gas is kinder to the environment by reducing vehicle exhaust emissions, and because of our nation’s abundant natural gas reserves, it represents a more secure American energy supply. According to the Department of Energy Clean Cities Alternative Fuel Pricing Report and the Institute of Energy Research, known domestic resources could satisfy the nation’s needs for more than 100 years.

Apache to Add Gas Fuelling Dispensers at Stripes Stores, USA LNG World News.

USA: TCEQ Says Grants Available for Gas Fueling Station

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The Texas Commission on Environmental Quality announced that up to $4.5 million in grants is being made available to eligible individuals, businesses, and governmental entities to support the development of a network of natural gas vehicle fueling stations to serve as a foundation for a self-sustaining market for natural gas vehicles in Texas.

The TCEQ Clean Transportation Triangle grants are part of the Texas Emissions Reduction Plan, and are offered to eligible entities that intend to build natural gas fueling stations along the interstate highways connecting Houston, San Antonio, Dallas, and Fort Worth.  These fueling stations must be located no more than three miles from the interstate highways and must be made available to the public.

CTT program goals include ensuring that natural gas vehicles purchased, leased or otherwise commercially financed, or re-powered under the Texas Natural Gas Vehicle Grant Program have access to fuel; and building the foundation for a self-sustaining market for natural gas vehicles in Texas.

Grants are offered to eligible applicants, with preference to be given to stations providing both liquefied natural gas and compressed natural gas at a single location; and stations located not more than one mile for an interstate highway system.

Application deadline is April 16, 2012.

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USA: Clean Energy Gets USD 150 Million in Investments

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Focused on supporting natural gas fueling in North America, investors, including Boone Pickens, have invested a total of $150 million in Clean Energy Fuels Corp., North America’s leading provider of natural gas fuel for transportation.

The investments resulted from the exercise of Mr. Pickens’ warrants to purchase 15 million shares of the company’s common stock at $10 per share. Mr. Pickens purchased 1.5 million shares and transferred the balance to existing investors RRJ Capital, Seatown Holdings and Chesapeake Energy Corporation, as well as Chief Capital LP, an investment vehicle wholly owned by energy investor Trevor Rees-Jones.

These investments bring the total invested or committed to Clean Energy to $450 million during 2011,” said Andrew J. Littlefair, President and CEO of Clean Energy. “We see this as a tremendous affirmation of both Clean Energy as the leader in natural gas vehicle fueling in America and our America’s Natural Gas Highway initiative that is expanding natural gas fueling infrastructure in cities throughout the country.”

We have a significant program underway to develop CNG and LNG fueling stations serving fleets in the long-haul, regional and port trucking markets, as well as for solid waste, transit, airport and municipal transportation nationwide,” noted Littlefair.

Currently priced up to $1.50 or more per gallon lower than diesel or gasoline (depending upon local markets), the use of natural gas fuel reduces costs significantly for vehicle and fleet owners, and reduces greenhouse gas emissions up to 30% in light-duty vehicles and 23% in medium to heavy-duty vehicles. Additionally, natural gas is a secure North American energy source with 98% of the natural gas consumed produced in the U.S. and Canada.

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NGVA Europe: Steady NGV Growth in Europe

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NGVA Europe published a new statistical update for the NGV (Natural Gas Vehicle) development in Europe and worldwide, showing a strong market development in the world of 12% compared with mid 2010, only 5% for total Europe, but 9% for the EU & EFTA countries.

There are now 1,4 million methane powered vehicles pan-European, thereof more than 1 million in the EU & EFTA countries and 13.5 million units worldwide. The pan-European NGV development since 2003 is shown on the picture.

There are three main reasons why the NGV market in Europe so far has been growing comparatively slower than in Asia or Latin America:

1. In Europe (or at least the EU/EFTA countries) NGV market growth is based on sales of new OEM vehicles. Only some 6-7% of the total volume of vehicles will be replaced by new vehicles. Outside Europe the growth is to a very large extent still based on conversions of existing vehicle fleets.

2. In Europe there are considerably smaller fuel cost advantages than outside Europe. NGV’s, regardless of vehicle category mainly compete with diesel vehicles. Outside Europe the competition is mainly petrol powered vehicles.

3. EU/EFTA like North America is a mature market with no large growth in the total fleet of vehicles. On the other hand, there is a dramatic growth of vehicle numbers in various fast developing economies, particularly in Asia which will quickly add numbers for all types of vehicles, regardless of the fuel used.

It is however to be expected that Europe will become a major market for CNG in light, medium and heavy duty vehicles (cars, vans, urban buses and trucks) and LNG medium and heavy duty trucks (as well as ships) using a mix of natural gas and bomethane up the road to 2020 and beyond. Main drivers will be more stringend emission policies set by the EU and also the availibility of brand new OEM (Original Equipment Manufacturer) CNG and LNG offers. European manufacturers have to meet the Euro VI standard in January 2014 and cars registered in the EU by 2012 shall not exceed 120 g/km. Several new OEM offers of e.g. CNG LDVs (Light Duty Vehicles), able to meet these targets, have been introduced or announced at the recent Frankfurt motorshow IAA, including the Volkswagen Up! (2012), Opel Zafira Tourer, Opel Combo (2012), Fiat Panda, Mercedes-Benz B-class (2012) or the Audi A3 (2013).

In Europe, some 70.000 NGV units (cars, vans, buses and trucks) have been sold since mid 2010 and NGVA Europe, the Natural & bio Gas Vehicle Association estimates that the European marketplace has a huge growth potential where the market share of methane (CNG, LNG and biomethane) powerded vehicles will grow from 0,4%, where it stands today, to 5% in 2020, 9% in 2030 and 16% -20% by 2050.

Original Article

Natural Gas Vehicle Subsidies Hurt Consumers

Published on May 11, 2011 by Nicolas Loris

The bipartisan New Alternative Transportation to Give Americans Solutions (NATGAS) Act provides preferential tax treatment to subsidize the production, use, and purchase of natural gas vehicles (NGVs). Supporters argue that it promotes transportation fuel competition and reduces foreign oil dependence and greenhouse gas emissions.

In reality, the NATGAS Act simply transfers a portion of the actual costs of using and producing NGVs to taxpayers. Special tax credits create the perception that NGVs are more competitive than they actually are by artificially reducing their price for consumers. Rather than increase competition, this artificial market distortion gives NGVs an unfair price advantage over other technologies.

Unfortunately, this shortcut to market viability does not work. Indeed, Washington has an abysmal record of picking energy winners and losers. Instead of adding more market distortions to the energy sector, Congress should remove energy subsidies and increase access to America’s resources.

The Market Is Already Working

The legislation creates, expands, or extends tax credits that subsidize NGVs. Supporters argue that the legislation would help NGV vehicle and infrastructure producers overcome investment obstacles and begin introducing new technologies to the marketplace. The truth, however, is that NGVs are already available, and nothing is stopping the market from expanding. The notion that no alternative fuels compete with gasoline is just not true. Consumers can choose vehicles that are powered by electricity, natural gas, or biofuels, as well as hybrid vehicles.

In fact, the trade group Natural Gas Vehicles for America claims that the United States has 110,000 NGVs and that more than 12 million NGVs are on the roads worldwide.[1] Billionaire investor T. Boone Pickens, a supporter of the bill, boasted in a recent speech that he owns a Honda Civic GX that he fuels with natural gas for less than $1 per gallon.[2] At a UPS facility, President Obama challenged transportation fleets to switch their vehicles to natural gas because it would be good for their bottom lines.[3] But if natural gas vehicles are economically competitive, vehicle manufacturers will make them and consumers will switch over without market manipulation from Washington.

A full-fledged competitive NGV fleet may eventually emerge. Rising gas prices make alternatives like NGVs more economically inviting, which should move investment to those technologies. That happens most efficiently when it is the result of a market-based response as opposed to government intervention. Indeed, government intervention to promote one technology over another only interferes in the process and creates another set of government-picked, taxpayer-funded winners and losers.

Reducing Foreign Dependence No Excuse for Bad Policy

The focus on decreasing energy dependence through government intervention and market distortion is folly. Policies that maximize access to a broad array of energy sources, domestic and foreign, will best serve Americans. A market-based approach would ensure that every American has access to affordable energy by putting a premium on sound economics through competition and choice.

This is not the approach of the NATGAS Act, which would make America economically weaker. When the government artificially lowers the cost of production, manufacturers must forgo the value of the goods they might have produced had they allocated their time, effort, and other resources in alternative ways. In this case, the NATGAS Act uses tax credits to create the perception of lower costs. This will fool consumers into purchasing more of these vehicles. Further, those hidden costs now have to be paid by someone else—the taxpayer. This leaves fewer resources for more productive activities.

A better approach to decreasing energy dependence is for the federal government to remove unnecessary rules and regulations that restrict access to all types of energy sources.

Reducing Greenhouse Gas Emissions No Excuse for Bad Policy

Reducing greenhouse gas (GHG) emissions is another dubious policy goal. Years of pressure from political leaders has forced significant changes in much of the business community. Energy producers became vested stakeholders and lobbied for handouts to produce what Congress determined to be cleaner energy. If these sources can compete without help from the government, the consumer will benefit through increased competition and lower costs. But creating an artificial market to reduce GHG emissions ignores both consumer preferences and economic fundamentals.

Moreover, Congress continues to ignore the vigorous disagreement within the scientific community concerning the effects of anthropogenic global warming.[4] Policy should never rest on a shaky set of assumptions, particularly when it can have far-reaching implications for American businesses and everyday Americans and could therefore fundamentally alter decisions in ways that harm America’s productive system of free enterprise.

Subsidies Do Not Work

Proponents of NGVs argue that because other alternative transportation technologies receive preferential treatment, so should natural gas. The problem is that government subsidies have a proven track record of not working. Congress should therefore remove subsidies from the transportation fuel market, not increase them.

Subsidies centralize power in Washington and allow lobbyists and politicians to decide which companies will produce. The more concentrated the subsidy or preferential treatment, the worse the policy is because the crowding-out effect is larger.

The NATGAS Act is a perfect example. Soon after its introduction, the National Propane Gas Association understandably voiced its opposition to the bill because the tax credits do not include propane gas. And that is just one problem with such bills: They distort the competitive process that so capably yields affordable and viable products, moving the decision-making process from the marketplace to Washington. Consumers, not Washington, should decide whether NGVs are better than propane.

Furthermore, subsidies funnel money toward projects that have little market support and offset the private-sector costs for investment that would have been made either way. This creates industry complacency and perpetuates economic inefficiency by disconnecting market success from production costs. By artificially lowering the cost of investment, subsidies take resources away from more competitive projects. The fact that other transportation fuels receive government support is not a good reason to continue or expand special treatment for natural gas. It is a good reason to remove those subsidies.

More Handouts, No Solutions

Pieces of legislation like the NATGAS Act will not be a quick fix for high gas prices and are not the way to reduce either America’s dependence on foreign oil or GHG emissions. They provide special benefits to one industry, distorting the market and misallocating resources away from potentially more economically viable alternatives.

If Congress truly wants to promote NGVs, it should eliminate subsidies in the transportation industry and consider other market-oriented policies—such as full expensing, lowering corporate tax rates, and removing barriers to drilling—that would incentivize the production of profitable endeavors and ultimately lower prices through competition.

Nicolas D. Loris is a Policy Analyst in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

Original Article

Honda Civic Natural Gas in Showrooms This Fall

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The 2012 natural gas powered Honda Civic, the only consumer natural gas car now available in the U.S. – although in a very limited fashion – will be released in wide distribution starting fall 2011 with the expectation that it will be in showrooms across the country within a year of that.  (Civic Natural Gas web site)
Honda’s web site is a bit more cautious than the article above, defining “nationwide” as “…states that have sufficient CNG stations within close proximity to authorized Civic Natural Gas dealers.”  But it is a start, especially given the growth (slow, but methodical) of CNG fueling infrastructure across the country.

Honda is changing the CNG Civic’s name from the Civic GX to Civic Natural Gas (“Civic Natural Gas” = CNG, get it?).  In gallon equivalents, the CNG’s mileage is rated at 27 MPG city/38 MPG highway/31 MPG combined, but of course the cost of natural gas is significantly lower than regular gasoline, so it’s not exactly an apples-to-apples comparison.  The car will be assembled in Indiana.  For those interested, the press release is full of all of the auto technophile’s data, from MacPherson struts to compression ratios.

Posted by Robert Hutchinson

Original Article

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