Compressed Natural Gas: Key to American Energy Independence? 56 comments
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In previous posts we've written about the prospects for natursal gas [NG] powered vehicles, and their potential to reduce America's reliance on imported crude oil and increasingly expensive gasoline and diesel fuel.
Currently there are only about 150,000 CNG (compressed natural gas) cars and trucks operating in the U.S. out of some 5 million worldwide, mostly in public vehicle fleets. Unlike the radical new electrics, they work on simple, decades-old technology. Moreover, existing vehicles can easily be converted to run on CNG as well.
So what's the problem then? Why don't we just "gas up" and go, shed our dependence on foreign oil and save money at the pump at the same time? Well, if you're familiar with the "chicken and the egg" syndrome, that axiom applies here precisely.
We have two interrelated problems, if you will. We need cars and trucks that run on CNG (ideally both CNG and gasoline), and we need public filling stations to refuel them. While neither of these difficulties are insurmountable, they will require investments from both automakers and the natural gas industry.
Billionaire oil man T. Boone Pickens has become engaged in this dilemma. His answer is to build massive wind farms, thereby freeing up enough NG off the nation's electric grid to operate millions of cars and trucks. He is building LNG (liquefied natural gas) terminals, which will fuel heavy trucks ("18-wheelers") newly designed to operate on this fuel. This is especially welcome in California, where clean burning LNG will replace foul-smelling, polluting diesel rigs.
But what about the rest of us? The first thing we need is a commitment from the automotive industry to build "dual-fueled" (CNG + gasoline) cars and trucks once more. This isn't a significant hurdle, since the Detroit 3 all built such "dual-fueled" fleet vehicles between 2000-05. While they never caught on with the price of gasoline at $2 a gallon or less, they will now.
More difficult is the refueling question. CNG filling stations require major capital investments, and their success is dependent upon having large numbers of vehicles to refuel. This is already working commercially in Utah and Oklahoma, two states which produce NG themselves. Drivers there buy the only CNG fueled vehicle now built in America, the Honda (HMC) Civic GX, and clamor for existing used "dual-fueled" cars and trucks they find on e-Bay. No wonder, since they fill up for the equivalent of less than $1 per gallon!
Energy companies in NG producing states like Louisiana and Texas have repeatedly looked at making such investments, but every time they've gotten close the price of oil has cratered. This shouldn't be a problem in the future, however, as it is increasingly unlikely we'll ever see the price of gas at less than $3 a gallon again.
In conclusion, NG powered vehicles have been around for a long time. But it took the vision of a Texas oil man, T. Boone Pickens, to call attention to the fact that they could play a decisive role in decreasing our dependence on foreign oil, while at the same time helping to improve our air quality. Now all we need is for American capitalism to follow up and take advantage of this opportunity.
Disclosure: None
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This article has 56 comments:
My PensonGHCo. statement shows I make 6500$ since going long October NG yesterday at 7.80$.
I look forward to significant shorts liquidation out there in the coming weeks and days,my only problem is selling to early.Sometimes I sell at 10000$ profit when another 1-2 hours would double it.
At least I am happy to make good money trading,as I have no vision nor idea if NG vehicles will ever hit the street.My Mercedes E Class Avantgarde is excellent benzin super car and I am not willing to drive T Boone Picken's futuristic vehicle just yet.I respect and love the man and feel very sorry for him to lose trading NG,it was the liquidation on Crude Oil that triggered this crazy NG sell.It will shoot up again,don't worry dear Pickens.
This is the perfect example for the government to step in a front the costs of adding NG to every gas station. With the lower cost, people will buy it, since there is really no downside consumers will see.
But when you go to a rat ass country in Eastern Europe, and see gas stations that pump natural gas (propane), and lots of small cars that use it, you may be forgiven to have concluded that in the US, we are experiencing an artificial, may be an induced crisis. Apparently anybody who is in position to do something about it, does not really take it seriously.
I mean using natural gas as fuel is not only cleaner, but virtually doubles the supply base for the driving public.
Just a thought.
I agree with the concept, but am just thinking ahead to the next problem. Replacing the lost taxes will have to be addressed at some point.
You raise interesting questions about taxes.
UT and OK don't tax CNG as a transport fuel. They also provide generous tax credits to residents who title such vehicles there to encourage its use.
The federal tax on gasoline is 18 cents a gallon. State and local gas taxes vary widely, from a low of 26 cents in Alaska to a high of 75 in California. Municipalities rarely tax gasoline.
CA has a ballot initiative this year to spend $5 billion to support CNG usage as a transportation fuel. If, as expected, it's adopted, it will be interesting to see how they spend this seed money.
Other places probably won't use it at all, but will benefit from lower gas prices due to NG's increasing substitution for gasoline elsewhere in the U.S.
A recent June 2008 article here - tinyurl.com/57me9l - provides a background on using UK luxury 2nd hand models to convert and then presumably run into the ground.
Depending on the model you may also find problems with insurance cover.
tonto.eia.doe.gov/dnav...
tonto.eia.doe.gov/dnav...
Look from 1999 onward - what does that tell you?
One thing about NG is the U.S. has ALOT of it. A 118 year supply at current rates of usage according to the EIA. And our reserves have DOUBLED during the past 10 years alone. And there's no tellling how much more well find when we open up the OCS to exploration.
But your point is well taken. That's why Boone Pickens is building vast wind farms, to take the NG we now use off the electric grid. This isn't a permanent answer to high oil prices, but at least when other affordable alternatives are eventually developed, we'll still be solvent.
The fly in the ointment with the rosy price savings forecasts if we redevelop the dual fuel vehicle is that Big Oil will jack up the price of CNG to about what gasoline is, or maybe even above it. See diesel fuel prices over the last 20 years if you don't believe it. Big Oil is never going to miss a trick.
The point is to STOP sending $700 billion overseas each year to import oil. If we continue this folly, the dollar won't be worth the paper its written on and we'll be broke.
The only flaw in that is our "Big Oil" companies control NEITHER the price of oil or natural gas.
you all need an update on the world of nat gas in transport. suggest several webste visits--
WESTPORT.COM
CUMMINSWESTPORT.COM
NGVAMERICA.ORG
SITES FOR CLNE[NAS], CHNG[OTC] SYSF
much more going on in world[including USA] of nat gas than your comments indicate.
What I think is that a study comissioned by a NG industry front group should be taken with a big grain of salt.
As to supply, where do I begin? In 1990 the Potential Gas Agency (the experts) estimated that, in the US, we had 1100 trillion cubic feet (Tcf) of gas resources (i.e., gas that could be produced economically at that time). We produce a little over 19 Tcf per year in the US. From 1990 to 2006, we produced and consumed about 300 Tcf. In 2007, the Potential Gas Agency estimated that we had 1500 Tcf in gas resources. Technology and economics had changed. Last month, a study by Navigant Consulting concluded the real number is closer to 2200 Tcf, primarily because we now know how to produce gas from gas shale economically. This would be 118 years of supply at current US production levels.
There also is the issue of methane hydrates. This is methane trapped in ice structures found off of every continent. It is estimated by the USGS that there is twice as much energy trapped in methane hydrates than in all the oil, coal and natural gas combined. The problem is that we don’t yet know how to mine it. But, keep in mind, we didn’t know now to mine gas from shale 15 years ago, and now it’s half our resource base.
Oh … and then there is biomethane. Methane is produced when organic matter decomposes without oxygen. DOE estimates that we could produce 1.25 Tcf PER YEAR easily from just landfill gas, sewage and animal waste alone. This is enough to fuel 10 million average cars. Importantly, in Europe, they have concluded that producing biomethane from cellulosic matter (crop waste and energy crops like switchgrass) is far more productive and less expensive than producing cellulosic ethanol. Cellulosic biomethane could provide a virtually inexhaustible supply of renewable methane.
Anyone that uses the “we’re running out of gas” argument against moving to NGVs is either misinformed or has another agenda.
As to price, unlike with oil, the US is not tied to world natural gas prices. Except for one small exception, there is no way to export natural gas from North America. As a result, while the world price is about $13 per MMBtu, the average US price is now below $8. (That’s $1 per GGE at the wellhead.) We have several LNG terminals in the US to import liquefied natural gas. Unfortunately for them, they can’t compete with the low US prices, and, therefore, are only operating at about 20% capacity – and that’s need just to keep the terminals from shutting down.
The study was performed by the American Clean Skies Foundation, a CA based environmental organization. HARDLY a NG industry front group in any event.
But if you have a better answer to our energy predicament, I'm listening with open ears for sure.
PaulK - I've never worked for GM or any automobile co. Have worked in the upstream & midstream oil & gas industry (the folks who produce, process and distribute natural gas and gas products), including hitches in operations and in strategic planning, domestically and internationally. Indeed, I once had need to keep a large number of small internal combustion engines running on natural gas in stationary service - and that was over 25 years ago. I'm an engineer who has moved on to the practice of law - principally commercial litigation. I'm used to hearing "theories" and puff pieces on what might be - but hard facts - business plans backed by credible data - that sort of thing impresses me. I have not yet seen anything of the sort.
AGAIN - my position is that all this 'silver bullet' crap is wishful thinking. Energy is going to be an ongoing issue for years. Use heavy taxes or subsidies? That will create perverse incentives - wish I was wrong - I've always liked fairy tales, but find them useful for entertainment only. PaulK - still waiting to see your CV posted to bolster your cred as an "alpha" author.
Thank you for the NG supply tutorial.
Are you familiar with any efforts to produce gas hydrates?
If it's a "plan" you desire, read the Pickens Plan.
And I don't believe in subsidies, either. Indeed, if it weren't for the 81-cent per gallon subsidy for corn ethanol, it wouldn't even exist.
As for my "cred," as you put it, let's just say I'm unaffiliated and pro-American. When I say something inaccurate, I'll welcome your critique.
Times do move on, my friend. From the time when you worked in the industry and I bought gasoline for 24.9. But that doesn't mean "old solutions" or "new technologies" are best. What's best is what WORKS. Or, as Boone would say, "The LOW COST solution wins every time."
And I'm not promoting our switching to NGV's (in part) as any sort of "silver bullet," either. I simply don't like the idea of America becoming a second rate country, which is where we're headed if we don't get this energy mess sorted out. So anything that helps if FIRST RATE with me.
I think we're on the same page, actually. But, if not, that's alright, too.
I do take issue with our government picking the winners and losers in the energy business, though. They have a PERFECT RECORD so far. They are 0-FOR as many times as they've stuck their beaks in!
(Much the same as the rest of their track record in interfering with our economy.)
myphill.com
fill'er up at home!!!!!!!!!!!
Interesting you said that. Pickens is the majority owner of CLNE. And, according to Cramer, guess who another major investor is? None other than Nancy Pelosi (who shares about as much in common with the Texan as I do the man in the moon). I could have fell off my chair!
Good technical comments. Do you know of any method to crack(?) methane (CH4) into propane (C3H8)? The obvious weight and energy for storage advantage would make it worth while!
I've done some research on the costs of converting vehicles to run on CNG. Probably about $5,000 installed, I'd venture, not to mention the difficulties inherent in EPA "certification," if required Alot cheaper to get Detroit to build them again, and they'd be "dual-fueled," the best of both worlds.
As for home refueling with the "Phill," that's about another $4K installed, if your home has access to NG. (Taken together, that's about the amount big trucks and SUV's have depreciated due to $4 gasoline.) But, take heart, NGV's are on their ascendancy, and more CNG filling stations are opening every day!
And that's the problem with involving them in the energy issue in the first place. They will do whatever they can to get re-elected, and the general public welfare be damned, not to mention the money being poured in by corn lobbyists.
And to think all this got started when we decided to bail out a bunch of broke corn farmers. Now they think they own the trough!
Denise Bode - CEO of American Clean Skies Foundation
Former Position: President of the Independent Petroleum Association of America for 7 years
I saw her speak once and all she talked about was natural gas - this group is def. a front for NG
Thanks for the hydrate info. Yes, Japan would make sense. They import all their energy, even the uranium for their nuclear electricity. They look around the world at who controls energy they must buy, and its not a pretty picture.
At least we have energy prospects in abundance. We just need to get going with ALL of them and see what passes muster. We also need to reform our regulatory regime, as it was designed when imported oil cost a fraction of what it does today.
But due to our public's new found interest in this issue ($4 gas has a way of getting your attention), we're beginning to do that, thankfully.
No one now can just take the best methods available and go with it.
Little old Thailand already has over 300 CNG stations . Most taxis, about 20% of large trucks , about half the buses and many private vehicles operate on CNG .
What is the problem in USA ? Hard to say , na ,no way could it be government jackasses .
By the way, about the "American Clean Skies Foundation" study that some have alluded to... the ACSF is not a genuine environmental organization. It's a creation of the natural gas industry, as this article from the Washington Post explains:
www.washingtonpost.com...
The study is basically industry propaganda intended to counter the "clean coal" movement (which I agree is silly). Since coal advocates are fond of claiming that the US has decades or centuries of coal reserves, the NG folks had to have a counter-claim. So they came up with this absurdly optimistic figure of 118 years of gas reserves. I challenge anyone to find an independent energy analyst who actually believes this figure.
And I'm sorry; I actually wish it were true. But for planning our energy future we need hard facts, not wishful thinking.
As to the study done for the American Clean Skies Foundation, just because they are supportive of natural gas, doesn't mean the study is incorrect. Just Google "gas shale" and see all the hits. The NY Times just ran a long story on the extraordinary prospects for gas shale. I'm confident that the 2009 Potential Gas Agency estimate of gas resources will reflect a huge jump in gas from shale (and be very close to the American Clean Skies number).
Finally, why do you assume that the current mix of gas use is the optimal mix. Shouldn't the market decide which is a high valued market and which is a low priority one? Last year, the average price paid for natural gas per million Btus by market was: Power generation: $ 6.90; Industrial: $ 7.04: Commercial: $10.75; and Residential: $12.52. When gasoline is selling at $4.00 per gallon, it is selling at $32.00 per million Btus. Let's say that natural gas needs to sell at a 25% discount to gasoline to attract customers. That's $24.00 per MMBtu. Therefore, the market says that NGVs are the highest valued of all the markets. Pickens wants to move gas from the lowest priority market (power generation) to the highest (NGVs). What's wrong with that?
<i> Now all we need is for American capitalism to follow up and take advantage of this opportunity.</i>
I don't think that will happen - in a timely manner (which would be, now) - without the government taking the lead jump-starting the fuel infrastructure chicken-and-egg issue. (Sort of like how the Ports of Los Angeles and Long Beach are jump-starting things at the Port, banning all 'old' diesel engine trucks in a few years; and replacing them with 8000 cleaner diesel - and 8000 LNG/CNG trucks; all paid for by a current levy of $70 per container).
A logical Federal jump-start for the nation would be:
- Set the national goal of having the following with a CNG/LNG fueling stations <i>in 5 years</i>:
- every airport;
- every port;
- all interstates, which are the arteries of the nation.
- all municipal bus fleets.
- Start off with an executive order that all Federal government domestic business, including civil service/military travel, is to: use only ng powered cars now, where available; and use NG cars, only, post 2012. This requirement alone - plus the knowledge that refueling stations <i>were</i>... coming - would be enough for all rental car agencies in the country to have some in stock
Along with whatever other incentive programs would be in place to encourage creating the stations (tax breaks et al), these mandates would be sufficient to jump-start the rest of the country. Knowing that fueling is available at every major airport; at every port; and along all interstates, would be enough to enable the whole nation into having ng vehicles.
Airport, port, and even municipal bus mandates would not be hard, at all; after all they all get Federal money; in addition, that's where much of the leadership in natural gas vehicle use is already being shown. In short, there already forces going in that direction; and a mandate from the Feds, with tax breaks et al behind it, would be enough to galvanize them all across the country. (Including vehicle producers; the failed American car companies are now deciding to get into the ng act).
It's the interstates - or arteries of the nation - that would require the most creativity and work. But even there, working with the states already heading in that direction, such as California, first, and with the proper incentives, it can be done. And unlike 10 years ago, high-quality ng engines now exist; as well as much of a basic fuel transportation infrastructure (natural gas pipelines). This is much more doable than any mandates for things that don't really exist- yet; ie, cost effective biodiesel, or cellulosic ethanol, or clean hydrogen. Unlike those, there is absolutely no technological hurdles remaining; one reason it really can be jump-started for the whole country in only five years. Something both Barack Obama and John McCain could jump on and both agree on, if either of them understood energy issues.
Jump-starting the shift to ng as a fuel, replacing oil imports with something that is cleaner, less-greenhouse warming, cheaper, and domestic (ie more US jobs), also, (he says, cheekily) removes more and more oil demand from the world which would reduce the subsidies to Vladmir Putin from invading countries; Caesar Chavez from wrecking South America; and lessen the small percentage of monies being syphoned off in the Middle East to support islamic extremism. Not bad.
jp