Fleets fueled by CNG can help solve U.S. energy riddle

By Wayne Wilson
Special to The Houston Chronicle

The complications and limitations of a national energy policy were aptly illustrated with the recently released Advancing Technology for America’s Transportation Future report from the National Petroleum Council, representing two years of work by 300 industry and government participants.

Its purpose was to provide policy guidance on fuels and technology through 2030 in the sector that consumes 70 percent of our oil – transportation. But it leaves us no closer to an answer to America’s energy riddle.

I would contend the answer is clear to anyone who reads the Houston Chronicle: natural gas.

U.S. energy consumers have heard for years about the megabillion cubic feet of natural gas in shale deposits from Pennsylvania to Texas to Montana – enough for up to 80 years of U.S. needs.

So why have increased supplies and lower natural gas prices not had a wider effect on other energy prices such as electricity and transportation fuels?

Clearly, the natural gas industry has not yet broken through to end users with compelling economic, environmental or convenience arguments the way the traditional oil industry has done for more than 150 years. In fact, the oil industry’s evolution may provide a roadmap for shale strategists developing market applications that accelerate use of natural gas to create a viable, self-sustaining, profitable shale industry.

In the 1880s, when gasoline was a solvent byproduct of kerosene distillation, the introduction of gasoline-powered automobiles provided consumers with a unique set of values and capabilities that became the foundation of the modern oil industry. Today’s natural gas industry must develop its own similarly unbeatable value proposition.

The gas industry doesn’t have to aim beyond oil’s original market entry point: vehicle fuels. Compressed natural gas (CNG) vehicles, including CNG-fueled fleet vehicles, can use all of the incremental gas supply from America’s shale plays while demonstrating the advantages and practical implementation of shale gas.

Vehicle transportation is the logical market segment to target for broad scale conversion. Energy use in transportation (28 percent) is second only to electric power generation (41 percent) in U.S. rankings.

Here are five strategies we should employ to produce short-term results and long-term growth:

1 Prime the natural gas pump with government fleet usage. Focus public and policymaker attention on the cost savings and emission-reduction benefits attainable by federal, state and local government vehicle fleets of CNG fuel and systems for all practicable uses.

1 Let independent producers grow the retail natural gas business. Vertical integration was an essential part of the oil industry’s development, and natural gas producers should not be barred from using this strategy, nor from the current tax credits for installing new natural gas refueling equipment. Pass H.R. 1712 to allow independent natural gas producers to establish retail CNG fuel stations.

- Create long-term incentives for natural gas fuel conversion in all sectors. Build broad consciousness of the employment, national security, energy security and environmental gains that can be achieved through tax credits and other incentives to support natural gas conversion.

- Create economic incentives for new natural gas development on federal land – Reducing royalties and easing licensing will lead to continued new development.

- Let the market dictate liquefied natural gas (LNG) exports. By staying out of decisions on whether to export LNG, the federal government can allow the free market to make these difficult choices.

Enabling a natural gas breakthrough by using the near-term fleet opportunity to begin making the fuel available across a variety of new market segments is the best economic, environmental and energy security decision available on the U.S. energy agenda today.

Wilson is the national energy practice leader for UHY Advisors’ (http://www.uhyadvisors-us.com) Forensic Litigation Valuation Services (FLVS ) practice.