CNG prices to jump 30 percent at some pumps

HOUSTON — The price of compressed natural gas for cars and trucks will jump 30 percent at some stations because of a federal tax credit set to expire on Tuesday.

The incentive has offered a 50 cent tax credit on each gasoline gallon-equivalent of natural gas sold by fueling stations.

While most stations pocketed most or all of the incentive to help cover costs, others, such as the 19 stations run by natural gas producer Apache Corp, passed on the entire credit to consumers in the form of a discount on their fuel.

Apache’s Houston refueling station at the company’s Galleria area headquarters, for example, currently charges $1.67 for each gasoline gallon equivalent of natural gas. The next cheapest station in the Houston area charges $2.04.

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But once the incentive expires, Apache will raise its pump prices by 50 cents per gasoline gallon equivalent, spokesman Bill Mintz said. The company’s stations are located in Texas, Louisiana, Oklahoma and New Mexico

Some other stations may also raise prices, but consumers probably won’t notice a difference at most pumps, said Lynn Lyon, director of fuel market development for Pioneer Natural Resources and leader of an industry-backed initiative to encourage more refueling stations in Texas.

“In Texas, the majority of the retailers are not passing that credit along to the end customer anyhow,” Lyon said. “So in Texas, what it means is it’s higher costs for the station developers. It doesn’t really have a significant impact, but it does take away the opportunity to decrease costs.”

The timing of the expiration is poor, Mintz said. Several automakers, including Ford, Chevy and Honda, are now selling vehicles that can run on natural gas and consumers and businesses have expressed increased interest in the fuel.

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If refueling stations do raise prices for consumers that could curb some interest in the fuel, Mintz said. Low costs for natural gas have helped Apache see an 88 percent jump in sales at its stations in 2013, he said.

“This comes at a time when CNG has more traction,” Mintz said.

Even without the incentive, however, natural gas maintains a discount of about a dollar on a gallon of regular gasoline.

While that discount offers significant savings, a natural gas vehicle costs at least $6,000 more than a gasoline-only model.

“People have to make their own calculations if you operate a large fleet of vehicles that drive a lot of miles, a dollar a gallon equivalent differential would still make sense,” Mintz said. “If you’re an individual who doesn’t put as many miles on a vehicle you just have to make your own personal calculation about how long it’ll take to recover the additional investment in a CNG vehicle.”

Of course, there are other advantages of natural gas to consider, Mintz said. Vehicles using the fuel have lower greenhouse gas emissions and are using a cheap form of energy produced in the United States, he said.

Congress also allowed a the tax credit to expire in 2011, leaving station owners without the incentive throughout 2012.

Lawmakers then renewed the tax credit after the 2012 election, making it retroactive for 2012 and extending it through 2013. The retroactive tax credit meant that consumers likely saw no benefit at the pump.