News from Washington these days is focused on energy policy. Cap-and-trade, oil drilling in the Gulf, and energy security are all headline stories.  All f these stories center on the key question: what policies should our federal government follow in order to achieve energy security and sustainable environmental stewardship?

Two reports have been released by Resources for the Future  (www.rff.org) and the National Energy Policy Institute (www.nepinstitute.org) that contributes to this debate. Both studies compare a comprehensive set of public policies for reducing imported oil and greenhouse gas emissions. The studies confirm that natural gas fueled-trucks can dramatically reduce our dependence on imported OPEC oil, while simultaneously reducing greenhouse gas emissions. You can view the studies at the links below. Be forewarned, the studies are academic and complex in nature. While full of interesting information, they are not a light reading assignment. Make sure you start a pot of coffee before diving in.

1. Energy, Greenhouse Gas, and Economic Implications of Natural Gas Trucks by Alan Krupnick, Resources for the Future and National Energy Policy Institute (http://www.rff.org/Documents/Features/NEPI/RFF-BCK-Krupnick-NaturalGasTrucks.pdf)
2. Toward a New National Energy Policy: Assessing the Options, various authors, Resources for the Future and National Energy Policy Institute (http://www.rff.org/Documents/RFF_NEPI_Exec_Summary.pdf)

The first study is one of several performed by the organizations to evaluate the impact of various public policies on reducing foreign oil and greenhouse gas emissions. These individual policy studies feed into the second study which provides a comparative assessment of the policy options.

The chief finding is that natural gas trucks are the most effective measure to reduce imports of OPEC oil compared to every other option. Significantly, natural gas trucks were also in the most cost-effective category of policy measures. The study authors found that natural gas trucks can reduce our demand for imported oil by over 2 million barrels per day. The authors found the additional benefit from natural gas trucks in reducing CO2 emissions by 1,821 million metric tons during the study period of 2011 to 2030.

Interestingly, the authors found that subsidies for hybrid vehicles alone show no progress in reducing oil use. This finding will obviously raise eyebrows, so see page 25 of the second report for more details.

About 5 million barrels of oil per day, one third of the petroleum consumed in the US, is imported from OPEC countries. OPEC countries include Iran, Libya, Nigeria, Saudi Arabia, Venezuela, and other unfriendly regimes. Petroleum is predominantly used as diesel and gasoline for transportation. Achieving energy security means we must reduce our consumption of diesel and gasoline.

In response to these pressures, on May 11^th, 2010 Senators John Kerry (D-MA) and Joe Lieberman (I-CT) introduced the American Power Act (APA), a broad legislative effort to address US energy policy, greenhouse gas emissions and energy sector jobs.  

The Pickens Plan is a straightforward road map to energy security that encourages trucking (and other) fleets to use natural gas fuel instead of diesel. Why the focus on trucking fleets?  Trucking fleets consume tremendous amounts of fuel per vehicle compared to passenger cars.  With many trucking operations operating in localized areas (local pickup and delivery, port drayage, and corridor shipping) they can easily be served by a small number of strategically placed fueling stations, allowing infrastructure to be deployed rapidly.  Another factor that makes trucking an obvious target for natural gas adoption can be found in how carriers routinely turn over their trucks, allowing them to introduce natural gas vehicles to their fleet incrementally.

The supply chain is under extreme pressure to reduce carbon emissions. Compared to diesel, natural gas reduces carbon by over 20% - up to 90% in the case of renewable biogas.  It's also been pointed out that having a competing fuel on the market will help keep diesel prices in check by reducing demand and inserting competition that does not exist today. Last but not least, our country will benefit from the lower cost of fuel and with jobs created in the USA.  

Now, what does the American Power Act do for natural gas vehicles? Incentives are provided to industry to deploy natural gas vehicles. Tax credits that exist today will be extended for 10 years and in some cases increased. Heavy duty trucks currently have a maximum $32,000 tax credit. The new tax credit will be up to 80% of the incremental cost of the natural gas truck with a maximum credit of $64,000. Since the incremental cost of a natural gas truck is quite reasonable, the actual tax credit will be less than $64,000 in most cases. The amount of the vehicle purchase tax credit is indexed to the vehicle class from light duty to heavy duty. Public agencies will be able to take advantage of the tax credit for their natural gas vehicle purchases.

The American Power Act has other provisions to encourage natural gas vehicles. Vehicle manufacturers will be eligible for a tax credit for their jobs-producing manufacturing facilities. Incentives will apply to dedicated natural gas vehicles, mixed fuel vehicles (engines using a mixture of natural gas and diesel or gasoline), and bi-fuel vehicles (engines that can use either natural gas or diesel/gasoline). The bill contains other technical provisions to help improve access to the tax credits.

These provisions of the American Power Act are vitally important to help natural gas vehicles bridge the gap in today's marketplace. The incentives are temporary so industry has the opportunity to develop economies of scale, infrastructure, and acceptance in order to compete without incentives. The choice is quite simple. Five years from now, do you want the USA to: (a) continue to export our wealth to OPEC; or (b) have a robust and flourishing alternative that keeps our money in the USA and grows American jobs?

This is a busy spring season for natural gas vehicles. The industry is full of announcements. Truck manufacturers Freightliner, Kenworth, Peterbilt, Autocar, Capacity, and Kalmar are expanding their line-up of natural gas vehicle offerings. Even Navistar announced their commitment to introduce a natural gas engine. It wasn't that long ago that you couldn't buy a natural gas truck from your dealer, but just look at these recent headlines:

February 9^th - Navistar Pursues Natural Gas for MaxxForce 13 Engines

http://ir.navistar.com/releasedetail.cfm?ReleaseID=443738

March 24^th - Peterbilt Launches Complete Lineup of Natural Gas Powered Vehicles

http://www.peterbilt.com/newsdetails.aspx?id=283

March 24^th - Kenworth Adds T440 Natural Gas Vehicle, Targets Local and Regional Haul, Vocational

http://www.kenworth.com/6100_pre_mor.asp?file=2536

March 25^th - Freightliner Trucks Offers Allison Optimized Packages for Business Class M2 112 Natural Gas Models

http://www.daimler-trucksnorthamerica.com/news/press-release-detail.aspx?id=992

Not to be outdone, the fleets are busy too. About a year ago AT&T announced the largest corporate commitment yet to natural gas vehicles. AT&T is in the process of deploying 8,000 natural gas vehicles over the next 10 years. They are also making good on this commitment, with many vehicles already deployed. Clean Energy has signed an agreement with AT&T to provide fuel for these new vehicles.

March 11^th (2009) - AT&T to Deploy More Than 15,000 Alternative-Fuel Vehicles

Makes Largest Commitment to Compressed Natural Gas

http://www.att.com/gen/press-room?pid=4800&cdvn=news&newsarticleid=26598

March 31^st - Clean Energy Signs Agreement with AT&T to Provide Compressed Natural Gas (CNG) Fueling Stations to Support AT&T's Nationwide Deployment of 8,000 CNG Fleet Vehicles

http://www.cleanenergyfuels.com/2010/3-31-10.html

Verizon followed suit this week by announcing their commitment to deploy 1,600 alternative fuel vehicles in 2010.

April 12^th - Verizon Launches Comprehensive Sustainability Program to Reduce Greenhouse Gas Emissions, Conserve Energy

http://newscenter.verizon.com/press-releases/verizon/2010/verizon-launches.html

Ryder Truck announced that they will begin deploying over 200 natural gas trucks in the Southern California market.

April 7^th - Ryder Awarded First-of-Its-Kind Natural Gas Heavy Duty Truck Project Using $19.3 Million in Stimulus Funding

http://investors.ryder.com/phoenix.zhtml?c=108468&p=irol-newsArticle&ID=1410703&highlight=

UPS, long a corporate leader in deploying natural gas vehicles, continues to expand their fleet of Brown natural gas vehicles.

January 19^th - UPS Deploys 245 New "Green" Trucks

http://www.pressroom.ups.com/Press Releases/Archive/2010/Q1/UPS Deploys 245 New %22Green%22 Trucks

Even hybrid natural gas vehicles are on the horizon.

April 14^th - US Groups to Coordinate Promotion of Natural Gas Hybrid-Electric Vehicles

http://www.ngvglobal.com/us-groups-to-coordinate-promotion-of-natural-gas-hybrid-electric-vehicles-0414#more-7753

This dizzying pace shows that fleets are rapidly embracing natural gas as their cheaper, cleaner, and American fuel.

A blog on the PMSA website titled "Testing, The Right Thing to Do" by TL Garrett misses the point in attacking natural gas trucks serving port drayage. Actually, the blog misses several points. Let's review the case for natural gas as a transportation fuel in the US.

National Security

In 2009, the U.S. imported 4.35 billion barrels of oil. About one-third of that oil came from OPEC countries. OPEC's share of U.S. oil imports continues to climb year after year. Who exactly is OPEC? OPEC members include Iran, Libya, Nigeria, Saudi Arabia, Venezuela and a few other international role models. Spot any true friends of the U.S. in this notorious group? I don't think so. Any number of foreign interests or events can easily disrupt our supply of oil. Isn't this why our U.S. military must continually be deployed to protect our oil imports? We know that the price of a gallon of diesel does not reflect the true costs of keeping this product flowing to our pumps. The world we live in is too dangerous to bet our future on importing oil from unfriendly countries. On the flip side, 98% of the natural gas in America comes from wells in North America, i.e. the United States and Canada. Given the vital need to keep cargo moving, one would think that PMSA would take the bet on the Canadians over OPEC. 

Jobs and Economic Recovery

We spent $265 billion importing oil in 2009. That is money being sucked straight out of our bank accounts and the U.S. economy and sent to foreign interests. We are funding both sides of a future war. We cannot continue to export our wealth if we are to remain the world's economic leader. Imagine if we replaced our OPEC imports with natural gas. This would immediately pump $90 billion into the U.S. economy and do it the old fashioned way - not through an economic stimulus package. Imagine the number of direct and indirect jobs that would be created by spending $90 billion annually on domestic energy right here at home. Imagine the impact upon our fragile economic recovery.  American energy and jobs or OPEC imports? The correct answer is obvious. Given the importance of the U.S. consumer to the business interests of PMSA members, one would think that the organization would put a high priority on U.S. economic recovery and stability.

Greenhouse Gas Reductions

Natural gas fueled vehicles reduce greenhouse gas emissions, when compared to gasoline and diesel, by up to 30% with traditional natural gas and by up to 90% with renewable biogas from landfills, farms, and other sources. According to the California Air Resources Board, natural gas already complies with the 2020 requirement of California's Low Carbon Fuel Standard. No other commercially available fuel or technology can achieve such benefits today. Natural gas is the one strategy that is available right now today to help trucking significantly reduce the supply chain's carbon footprint.

Cleaner Air

Natural gas engines have always led the way to cleaner air, while diesel engines have always played catch-up in response to EPA mandates. In fact, the natural gas engine cited by Mr. Garrett complied with EPA's 2010 emissions standard over 2-1/2 years ago. Diesel engines are now just meeting 2010 compliance. And be very careful with 2010 compliance. Some diesel engines don't actually meet the 2010 standard. Instead, these engines are using emission credits to comply with 2010 "certification" requirements. What does this mean?  The "2010 compliant" diesel engine may not really be all that clean. They are not actually emitting at these low levels, but are instead using "credits" to trade actual tailpipe emissions.  Sadly, the California Air Resources Board is relaxing their standard for the Carl Moyer vehicle replacement program because not enough diesel engines comply with the 2010 EPA standard without credits. The long story short: diesel engines are putting more emissions into local communities than advertised by "2010 emissions."

Oddly, Mr. Garrett focused on the EPA 2010 emissions standard even though port drayage trucks do not need to meet this standard. In fact, the most stringent standard at any U.S. port is the EPA 2007 standard adopted by the Ports of Los Angeles and Long Beach. All of the thousands of new "clean" diesel trucks deployed at LA and Long Beach meet the 2007 standard, not the 2010 standard. For reference, a truck with an engine that meets the EPA 2007 emission standards is six times dirtier than one meeting the EPA 2010 emission standards. On the other hand, all of the natural gas trucks operating in the ports are better than the EPA 2007 standard and most meet the EPA 2010 standard - without the smoke-and-mirrors of emission credits. In the future, used diesel trucks meeting the EPA 2007 standard will be deployed at these ports instead of trucks meeting the EPA 2010 standard; robbing communities of the additional emission reductions they could be provided with natural gas engines. The comparison Mr. Garrett should really be making is the EPA 2010-compliant natural gas engine against EPA 2007 diesel engines. Of course this is a problem for his viewpoint because the 2010 natural gas engine reduces NOx by 83% compared to the 2007 diesel engines.

People

Finally, let's not forget the truck driver that pays for his or her fuel. These drivers are at the bottom of the supply chain yet have a vital role in delivering the goods in our economy. Natural gas is cheaper than diesel. In 2009, port drivers with natural gas trucks saved roughly $2 million compared to diesel. A natural gas truck driver can pocket an extra $5,000 to $6,000 or more per year. For a driver making $30,000 per year, natural gas fuel savings amounts to a 20% raise and contributes to a more reasonable and sustainable standard a living that is good for our local economies.

The Full Analysis

Natural gas is cheaper, cleaner, lower carbon, American, and abundant. This isn't a slick Madison Avenue marketing slogan like "Clean Diesel".  These are simply the facts.

The truck world is all abuzz about EPA’s 2010 standards for diesel emissions. Press announcements and media stories are in the news it seems daily. Volvo and Mack announced that they received the first 2010 EPA certification. International continues their legal wrangling with EPA over allowing the use of selective catalytic reduction (SCR) to comply with 2010 standards. I attended the OPIS Fleet Fueling Conference earlier this fall and the conference subtitle could have been “All About DEF”. The ATA Management Conference in Las Vegas also featured DEF. DEF, in case you don’t live and breathe the truck world, is diesel exhaust fluid. DEF is a chemical used in an SCR control device to reduce emissions of nitrogen oxides (NOx). In the eyes of a truck operator, DEF is another fuel system that must be maintained and replenished.

EPA’s 2010 emission standards are the next incremental change to the diesel truck. What do I mean by an incremental change? Just like the add-on diesel particulate filter, single wide tires, and aerodynamics, the industry is making gradual changes with diminishing returns. This is the nature of technology. Easy (and inexpensive) changes with big impacts are made first. Each additional round of change has a smaller overall impact at a higher cost. Looking forward – after 2010 emission control systems are common, aerodynamics are in place, improved tires are on the road – what happens next?

Trucking will be faced with two key issues going forward: reduction of greenhouse gases and spiraling fuel prices. Unfortunately, all of the technologies being implemented provide only modest improvements that trim around the edges. What’s needed is technology that leapfrogs beyond where we are today and propels transportation into a low carbon world with affordable fuel.

Of course you know that the answer is natural gas fuel. Natural gas is the single alternative fuel we have today that is proven, plentiful, secure, and cheap. Consider this. Natural gas fuel reduces greenhouse gas emissions by up to 30%. Biogas (produced from landfills, feedlots, and other biological sources) reduces greenhouse gases by over 80%. What other technology is available today that produces such profound reductions? To borrow terminology from the venture capital world, natural gas is a “disruptive technology”. Natural gas is not a small incremental tweak, but a step change. Disruptive changes are difficult for some because, well, they are big changes. We are reaching a fork in the road. Today’s easy path, which is continuing to tweak what we have, leads to a dead end around the next corner. The other path leads to America’s next transportation fuel – cheaper, cleaner, American natural gas.

Why is the NatGas Act so important to Americans? The NatGas Act is a top priority in T. Boone Pickens' Plan for Energy Independence. America needs to get off foreign oil and use domestic energy. And not just any energy, but energy that is cleaner and cheaper and sustainable. Natural gas is this energy source. But natural gas needs a boost to get started to compete against the monopoly of global oil. Existing fuel systems, infrastructure, and manufacturing have a head start built over many decades. The NatGas Act is the jumpstart needed by fleets and the alternative fuel industry to build the business foundation that is sustainable and can compete on a wide scale against diesel and gasoline. The NatGas Act provides reasonable incentives that are temporary - enough to get the industry going.

Of course in a perfect world we wouldn't need government involvement, but the world is far from perfect. Our reliance on foreign oil has relentlessly climbed as our leadership has drifted. Without leadership and action, the US will continue to ship our dollars to foreign countries to buy oil. Even with relatively inexpensive oil, we are spending over $20 billion per month importing the stuff. Imagine if that $20 billion was injected in our own economy every month - what would that do to help American's with good paying jobs? This is a serious matter and we collectively need to get serious about taking action.

Right now today, the NatGas Act needs your help. Contact your Senator and your Congressman and insist that they support the NatGas Act and move the legislation forward. Washington needs to take action on energy. The Pickens Plan website has an easy and convenient way to contact your Washington representatives. This only takes a few minutes of your time but will help take America on a new path for energy independence. Here is the link to take action now:

http://www.capwiz.com/pickensplan/issues/alert/?alertid=14341701&type=TA

I am returning from Atlanta where I attended the OPIS National Fleet Fueling Conference. Aside from flooding in the area, I enjoyed the conference and met many interesting people on the fuel side of the business. The focal point of the conference was diesel emissions fluid (DEF). DEF is a chemical that is consumed by selective catalytic reduction systems to control NOx in 2010 diesel engines. Vendors were looking forward to a new business line. I’m not sure fleet operators share this enthusiasm.

I did make a presentation at the conference that covered California’s new Low Carbon Fuel Standard (LCFS). LCFS is California’s approach to reducing carbon emissions from vehicles. LCFS is fundamentally different than the Federal Cap-and-Trade program that is being discussed nationally.  LCFS is more like a surgical strike against one source of carbon emissions. Cap-and-Trade is a broad-brushed stroke against all sources. Why did California choose the LCFS strategy?

California’s framework is to reduce greenhouse gas emissions (carbon) from all key sectors. Studies performed by the University of California and others determined that transportation accounts for about one-third of the carbon emissions. The studies found that a carbon trading price of $25 per ton (or is it tonne?) is sufficiently high to force dirty power generation such as coal to implement clean-up measures. In other words, it is cheaper to modify power generation than to purchase carbon credits at $25 per ton. For comparison, high quality carbon credits in the regulated European market cost about $20.

However, the study also found that $25 per ton is too low to influence the transportation sector to significantly reduce carbon. In fact, the cost would need to be much higher. The concern this raised is that one sector, power generation, would be forced to reduce carbon emissions while another key sector, transportation, would experience higher costs without dramatic carbon reductions. This result would be inconsistent with California’s strategy of reducing carbon in all sectors.

What I found interesting in the literature is the wide range of estimated fuel cost increases for Cap-and-Trade. Some citations I found are:

•    $0.88 per gallon (US Chamber of Commerce)
•    58% increase (Heritage Foundation)
•    $0.02 per gallon (attributed to Sen. Barbara Boxer)
•    $0.17 per gallon @ EPA’s estimated $15/ton carbon

LCFS compliance applies to the fuel producer and not the fuel consumer. LCFS sets limits on fuel carbon (I am simplifying this concept). Fuel producers must either reduce the carbon in their fuel or purchase offsets from other fuels that have carbon reductions above and beyond the standard. The only impact the fuel consumer will see is perhaps a higher pump price for gasoline and diesel. LCFS implementation begins in 2010. By 2020, carbon must be reduced by 10% compared to gasoline and diesel. Reductions are phased in each year. Reductions are gradual in the near years and accelerate in out years.  The reduction graph is shown below.

The good news on the natural gas front is that natural gas fuel already complies with the 2020 standard. LNG can reduce carbon emissions by over 20%. CNG reductions are almost 30%. Biogas reductions are over 70% to almost 90%. This means users of natural gas fuel are already in compliance - 10 years ahead of schedule - and will be insulated from any cost impacts experienced by other fuels in complying with the standard. Yes, one more reason to go with natural gas.

The station is a good example of a public-private partnership. The Ports selected Clean Energy to develop the station after a competitive selection process. The Ports jointly own the property and serve as landlords. Clean Energy is the developer and operator of the station. The station occupies a 2.9 acre site. The project involves two phases of which Phase 1 is complete. Phase 1 consists of two LNG storage tanks that hold 25,000 gallons of LNG each. There are six fueling lanes with 6 LNG dispensers and 2 CNG dispensers. Three of the LNG dispensers deliver "Blue LNG" that is optimized for the Westport compression ignition HPDI engines. The other three dispensers deliver "Green LNG" that is optimized for the Cummins-Westport spark ignited engines. CNG dispensers are located on two of the fueling lanes. The fueling lanes are shaded by a big beautiful canopy. Truck drivers are even provided with private restrooms. Phase 2 will deploy two additional 25,000 gallon tanks to give total storage of 100,000 gallons plus four additional fueling lanes.

Protecting water quality is important to the Ports as is cleaning the air. The entire station site drains to a storm water retention pond. For those few times a year when it rains in southern California, all of the storm water is collected. The water is then cleansed through a series of filtration systems before being released to the storm drain.

People I meet are often interested in the challenges of permitting an LNG truck station. We were fortunate that the permitting process with the City of Los Angeles went smoothly. In fact, permitting wasn't really the challenge with this project. The biggest obstacle we faced involved creating a new property parcel map which has nothing to do with building an LNG station. The parcel map hurdle was left over from prior uses of the property. I gained new respect for developers that have the fortitude to go through the parcel map process in order to develop their projects. We made it through with a lot of help from folks at the Port of Long Beach Real Estate Department and at the City of Los Angeles. Completing the parcel map was even celebrated with a Parcel Map Cake baked by the Port of Long Beach. I just hope our next project doesn't involve a parcel map.

The Clean Truck Program at the Ports has been anything but quiet. Court cases by the American Trucking Association and Federal Maritime Commission plus exhaustive media coverage have kept the Clean Truck Program in the spotlight for over a year. Employee mandates, dirty truck fees, old truck bans, and other controversies have kept industry buzzing this entire time. At the same time, quietly, a revolution has started. I call this the Quiet Revolution because, while overshadowed by higher profile issues in the Clean Truck Program, I believe the alternative fuel policies of the Ports will impact goods movement in this country and perhaps the world far more than the other issues that received all of the attention.

About one year ago the very first 8 natural gas port trucks were deployed by a local drayage firm called TTSI. Another 50 natural gas trucks were deployed shortly after by Southern Counties Express. Thanks to generous support by the Ports and the Air Quality Management District, other drayage companies such as Cal Cartage, Green Fleet Systems, Pac 9, Calko, JBA, Hay Day Farms, and Border Valley Farms quickly followed. Fast-forward to today. There are now between 400 and 500 Class 8 natural gas trucks operating in the Ports. There should be over 1,000 natural gas trucks in the Ports by the end of this year. Excluding refuse trucks, more Class 8 natural gas trucks have been deployed in the past year than the total deployed in the history of the industry. Now that I have made this claim, I will do some research and report back later with some better historical perspective.

The companies and drivers are having tremendous success with the natural gas trucks. Drivers report they like the trucks because they do the job and are quieter and cleaner. Of course everyone likes the fact that they are saving money over diesel. And a good number of people feel patriotic that they are using American energy instead of imported oil.

What is happening at the Ports is the proving ground for the rest of the trucking industry. Natural gas trucks operating at the Ports are demonstrating that the technology is ready for local and regional trucking applications. Hauling 80,000 GVW around the greater Los Angeles area with natural gas trucks can be replicated in any metropolitan area. These natural gas trucks are proving that they are up to the task whether hauling containers to distribution centers or delivering goods to the stores.

I do find it fascinating that the success of natural gas trucks is threatening to some. I guess change can be hard to accept. However, make no mistake. The revolution has quietly started.