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Guest Opinion: Natural Gas as The “Buy American” Energy Alternative

One fossil fuel that might make sense even to “greenies”?

by on Jul.13, 2012

A rare public CNG filling stations near Los Angeles.

Best known as the founder and former Chairman and CEO of Subaru of America, Inc., Harvey Lamm is the co-author — with Syd Havely — of the recently-published book, “Getting Traction—The Subaru Story and the Entrepreneurial Mindset.”

At a time when other executives might be enjoying retirement, however, Lamm has begun a new career as Chairman of VNG.Co., a firm hoping to develop a nationwide, retail-oriented CNG fueling network to support fleets, including commercial and government agencies. Lamm is far from the only proponent of CNG and a slowly growing number of manufacturers, notably including Honda, are lending support with new products able to take advantage of the clean and relatively inexpensive fuel. This opinion piece was adapted from Lamm’s new book, now available through Amazon.com.

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One can’t turn on the TV or read the paper without hearing that either the electric car is the vehicle of the future or that rumors of its troubles—technical, mechanical, financial, or sales—are overblown.  All may be true. Technology is a moving target. There is no ‘finish line’ or silver bullet that we can see now for how the nation’s 250 million cars now on the road burning 350 million gallons of gasoline a day or the approximately 15 million cars and light trucks being added each year will be powered.  One thing is certain, though—relying on gasoline alone or electric alone or even hybrid electrics won’t get us to energy independence.  But there is an alternative fuel that will, in combination with oil and gas and electrics and hybrids, and that is a fuel source America is blessed with in abundance—natural gas.

America is the Middle East of natural gas. We have the world’s sixth largest proven reserves.  We have over 100 years of natural gas energy not counting non-traditional gas reserves such as shale gas, which now accounts for 37 per cent of U.S. natural gas production, a number which is expected to grow to 60 per cent by 2035.  Compressed natural gas (CNG) is 40 per cent less expensive than gasoline, 20 per cent cleaner, and safer.  It doesn’t have to be shipped, refined, stored, transported over highways, and then stored again like gasoline.  Natural gas is pumped via pipeline from the well to pump.  It has the same equivalent energy content as gasoline and its most important attribute is that it can be easily used in today’s internal combustion engines without sophisticated or complex conversion technology.  Already America’s Big Three and other automakers are manufacturing either Compressed Natural Gas or CNG bifuel vehicles for the world’s 15 million natural gas-powered vehicles.  An engine that can run on both CNG and gasoline is most easily and least expensively configured by an Original Equipment Manufacturer, such as GM, Ford, or Chrysler.

 

What’s more, switching from CNG to gasoline or vice versa can be done easily—automatically or manually.  Fill-ups are similar and CNG vehicles’ OEM cost in more developed natural gas vehicle markets is only several thousand dollars above gasoline-only vehicles.  So in coordination with the price advantage of natural gas, payback to the vehicle owner can occur within a few years of ownership.  With economies of scale, it could be cost-neutral.  It is also convenient for fueling networks.  Natural gas service already is available for many gasoline stations or new locations for added convenience in fill-ups.  CNG bifuel vehicles also require less maintenance than gasoline-only vehicles because they run cleaner.  They also have considerably higher resale value than EVs because there is no battery pack to replace.  In time, with greater natural gas fueling stations, cars and light trucks could run on CNG alone.

 

Natural gas is the seamless bridge to America’s energy future.  Larry Fink, Chairman and CEO of BlackRock, the largest money management firm in the world with $3.5 trillion in assets, said that America is at the tipping point of no longer being dependent on Middle East oil.  The treasure trove of natural gas, new oil fields, and alternative fuels have the ability to make the U.S. and North America “energy independent” in the next 10 years if the proper infrastructure is put in place to take advantage of our natural gas.  After an era of declining production, the U.S. is awash in a treasure trove of natural gas at historically low prices.  Natural gas is $2/BTU in the U.S., $10/BTU in Europe, and $15/BTU in Asia.  That makes it not only cost-effective for use in the U.S. but a potential and lucrative export commodity.

 

Similarly, Daniel Yergin, the author of “The Quest: Energy, Security, and the Remaking of the Modern World” and chairman of IHS Cambridge Research Associates, calls natural gas part of America’s “new energy story” accounting for “billions of dollars of new investment—and a lot of new jobs”— 600,000 jobs by 2010 that is expected to grow to 870,000 by 2012, according to a January 2012 IHS Global Insight study (http://press.ihs.com/press-release/energy-power/shale-gas-supports-more-600000-american-jobs-today-2015-shale-gas-predict).  Growing American shale gas production, sourced primarily by domestically-based suppliers, the study found, are expected to further increase U.S. manufacturing and high-paying jobs in trucking, steel fabrication, heavy equipment manufacturing, transportation, and education.  Further the natural gas industry will generate increases of $933 billion in additional tax revenues to local, state, and federal governments over the next 25 years, with $924 more in annual household disposable income by 2015 as a result of a switch to natural gas fueling costs for cars and utilities.  This is an investment we cannot afford to pass by.

 

The Achilles Heel for natural gas for cars today is that it is not now viable for auto manufacturers to make CNG bifuel cars without an alternative fuel incentive.  It is similarly not viable for companies to invest in a natural gas fueling network on the scale needed to support a national fleet of cars and light truck consumers without customers who want to buy them.  Currently the CNG vehicle population is about 120, 000 vehicles nationwide comprised chiefly of heavy duty trucks and buses—such as trash trucks and city buses.  Some municipalities fuel their fleet cars on natural gas whose use is local and which can be refilled at night in the nation’s 1000 natural gas fueling stations, half of which are privately owned.

 

The greatest beneficiary of natural gas is the nation’s fleet of light-duty vehicles which account for 80% of on-road motor fuel use and includes light duty trucks, such as SUVs, pickup trucks and vans that occupy over 50% of consumer’s buying choice and are by far the greatest number of vehicles on the road today and are costly to Americans in terms of fuel, toxic emissions, and oil consumption.  Electric power is not suitable for either class of vehicle—light-duty trucks or heavy trucks and buses.  The internal combustion engine best suits these vehicles’ requirements for power and performance. Natural gas can be seamlessly substituted or work in tandem with gasoline or diesel that can provide the best, safest, and lowest-cost alternative to gasoline or diesel-powered engines alone.

 

Although oil prices have returned to below $100/barrel levels for now and with them lower gasoline prices, oil prices are among the world’s hardest commodities to predict.  With the Arab Spring showing no clear path and geo-political tensions heating up in Iran and Syria, not to mention Egypt, the U.S. should do everything in its power now to wean the nation off its foreign oil umbilical cord.  By contrast, 98% of the natural gas consumed in the U.S. is produced in North America cheaply, abundantly, and safely. This is an energy alternative that should not be left out of the equation of alternative fuels for cars.

 

To make this energy independent scenario a reality, there has to be a working and actionable partnership between industry, government, and the consumer to build, buy, and fuel CNG  vehicles.  If the goal is to provide a seamless substitute for gasoline and diesel fuel in the long term and to have that alternative fuel cleaner, safer, cheaper, and domestically available, why wouldn’t the same credits and incentives be provided consumers who purchase CNG bifuel vehicles as now exist for buyers of electric or electric hybrid vehicles?

 

We should also continue to pursue hydrogen fuel cells, ethanol, methanol, biodiesel, and even battery power. All alternative fuels should be able to compete on an even playing field.

While the benefits to America’s energy independence are significant and even game-changing, it is incumbent upon the natural gas industry to protect human health and the environment by installing safeguards, processes, and practices to assure both regulators and the public that they are exercising responsible care in all phases of production—from drilling to extraction, to transport, to dispensing to the end user. Natural gas is a “buy American” resource that should be used wisely as well as profitably.

(In full disclosure: TheDetroitBureau.com Publisher Paul A. Eisenstein provided the foreword to Harvey Lamm’s new book.)

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