UPS delivers a boost to propane as vehicle fuel

HOUSTON — Most people — especially Texans — know propane as the fuel source that allows them to fire up a backyard barbecue in seconds.

Now it’s also heating up as an alternative motor fuel, as companies with vehicle fleets embrace its lower costs and smaller environmental footprint relative to gasoline or diesel.

Shipping company UPS announced plans this month to spend $70 million on 1,000 propane-fueled vehicles and 50 refueling stations in the United States, where the company operates about 77,000 ground vehicles.

Other big companies also have added propane to their fuel mix.

Airport transportation service SuperShuttle touted its propane vehicles earlier this year, saying its 160 propane vehicles, including 30 in Houston, are reducing fuel costs by as much as 60 percent.

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Last year, DirecTV announced plans to include more propane-fueled vans in its repair and installation fleet.

And in recent months, school districts in Texas, Arizona and Montana have announced the purchase of propane-powered buses.

The increased attention on propane, also known as autogas or liquefied petroleum gas, comes as the country enjoys a boom in domestic energy production.

Propane is a byproduct of natural gas processing and crude oil refining. Primarily used for home heating and cooking, transportation represents just 2 percent of the fuel’s domestic use, according to federal estimates. But that may be changing.

“It’s starting to make a lot more sense, given the boom in domestic production,” said Roy Willis, CEO of the Propane Education & Research Council, an industry group.

It is generally less expensive than gasoline, according to the Department of Energy, and emits fewer air pollutants and greenhouse gases.

The cleaner burn also extends engine life, advocates say.

“If you’ve got longer engine wear, the economics of that power system really goes to the bottom line in a beneficial way,” Willis said.

Still, when it comes to alternative fuels for vehicles, compressed natural gas typically generates more buzz than propane. Texas energy magnate T. Boone Pickens is a cheerleader for CNG; propane has no such iconic champion.

Small players

And some of the world’s largest companies produce and supply natural gas, while propane typically draws smaller players.

UPS officials say they were motivated to consider propane because of a desire to make a positive environmental impact, and also to save money.

They say the new vehicles will collectively travel more than 25 million miles and replace 3.5 million gallons of gasoline and diesel annually.

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Mike Casteel, director of fleet procurement for UPS, says the company expects to pay $1.25 to $1.50 per gallon less for propane than for gasoline. A gallon of propane will only take a truck about 75 percent to 90 percent as far as a gallon of gasoline, but the savings still can amount to $1 per gallon or more. He also said the company believes growing domestic energy supplies will keep long-term propane prices stable.

Cost of fueling stations

UPS believes propane-powered vehicles could be more economical in some situations than compressed natural gas. Both fuels are less expensive than gasoline, but Casteel said propane fueling stations are cheaper to build than CNG stations.

It costs $37,000 to $175,000 to build a propane station, according to the Department of Energy, while a CNG station can cost millions of dollars.

Casteel says that price difference is especially significant for UPS, since it plans to use the 1,000 new propane vehicles in rural locations in Oklahoma, Louisiana and elsewhere.

In a big city hub with a large UPS fleet, a CNG facility might have made sense. Only 20-40 vehicles will use each of the new propane facilities, Casteel said.

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Propane stations are simpler, Casteel said, partly because the fuel is stored in above-ground tanks and delivered by truck, so it doesn’t require pipelines.

Rhea Courtney Bozic, principal of Clean Fuels Consulting, a New York company that helps companies plan alternative fuel fleets, said a growing number of manufacturers have been producing the components needed for propane vehicles, which might be helping to generate interest in the fuel. And the industry has improved its marketing of propane as a transportation fuel, she said.

Still, despite the move by UPS and others, propane vehicles represent just a fraction of vehicles on U.S. roads – about 140,000 of 250 million, according to the industry and the Energy Department.

Larger fuel tanks

The technology isn’t perfect. Propane has slightly less energy content than gasoline. That means vehicles need more fuel and larger tanks to go the same range, according to the Environmental Protection Agency.

Whether purchased new or converted to use the fuel, propane-powered vehicles – like most vehicles running on alternative fuels – can cost thousands of dollars more than their gasoline equivalents. And cold weather earlier this year caused some propane users to suffer from spikes in their fuel costs.

Willis of the propane council said companies that have big fleets of propane vehicles tend to have long-term fuel contracts that insulate them from short-term price fluctuation.

“The cost of the fuel for fleets is very predictable,” he said.


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