Methane has an uphill route to become a mainstream motor vehicle fuel

Source: Mansfield News Journal

Natural gas prices are back up around that magic mark of $4 per unit thanks to a winter that keeps hanging on, but experts say that if producers want to find enough buyers for all the recently mapped shale gas reserves, including Ohio’s Utica Shale, then they need to diversify the end uses of natural gas.

Natural gas already has forced its way into the power generation market as a way to supplement its primary use as a heating fuel. But another pool of potential customers is out there: drivers.

Clean Fuels Ohio has played a central role in the nascent natural gas vehicle movement in Ohio. Its program director, Andrew Conley, says it just needs a little push.

“The technology is there, the fuel is in the ground here in Ohio and everything is ready to go,” Conley said. “It’s just a matter of having the right kind of policy framework.”

The prospect of a system of natural-gas filling stations is real enough that the Center for Automotive Research at Ohio State University is in the midst of quantifying the jobs that could result. The head of the research team, Jim Durand, said findings could be ready by summertime.

A series of new shale discoveries, including Ohio’s Utica Shale, teamed with advancements in hydraulic fracturing and horizontal drilling helped create a glut of natural gas, which drove down prices and tamped investor enthusiasm for getting more gas from the Utica and elsewhere to market.

But natural gas futures were trading near $4 on Friday, a day after a report from the U.S. Department of Energy showed a continued shrinking of supplies.

There was 500 billion cubic feet less of stored natural gas last week than during the same period in 2012, when a warm winter made a smooth transition to spring for most of the U.S. Natural gas prices kept sliding and ended up below $2 in April 2012. That didn’t exactly lead to a rush to get shale gas out of the ground.

The energy department projects natural gas prices to average $3.42 for the rest of the year, according to its latest short-term energy outlook, and to grow by 20 cents next year.

Douglas Southgate, an economics professor at The Ohio State University who monitors the shale industry, said producers need to find more or greater uses for natural gas if they are ever going to lessen the cyclical risk of a warm winter.

He and others are not convinced natural gas vehicles will be that end use because the prototypical buyer, at least for the moment, is a very select type of business.

Last summer Rumpke purchased 12 natural gas-powered trucks, all running routes from the same base near Cincinnati, to see how the trucks, drivers and their balance sheets responded, said Amanda Pratt, a spokeswoman for the trash collector.

“We were able to gather that data and that research and we found them to be very successful,” she said. “The fuel cost is significantly less. The emissions are significantly less.”

Compressed natural gas, or CNG, which is mostly methane, works for Rumpke for a few reasons.

First off, these 10-ton trucks get terrible gas mileage because of all the city driving and the stops and starts associated with residential trash routes. Though it won’t get you quite as far, a gallon equivalent of CNG was priced at $2.37 last week while a gallon of diesel was $4.09. That means they can make up the $50,000-upcharge for the natural gas engine pretty quickly.

With the help of Clean Energy Ohio, Rumpke received a federal grant that covered $800,000 of the $3.1 million cost for the refueling equipment at its base.

But maybe most importantly, the trucks all drive fixed, local routes, meaning they can gas up at the base overnight and be ready to go for a full 10-hour shift the next day. That’s the real issue with CNG: There’s just not that many filling stations.

This is where the chicken-and-egg talk starts, Conley said.

“You have a company that wants to build that station but they want to make sure they have a fleet that is going to use it before they build it, but the entity that is considering switching to natural gas wants to make sure they are able to refuel somewhere before they switch,” he said.

Jimmy Stewart, a former state senator who now is the president of the Ohio Gas Association, said there is a future for natural gas as a vehicle fuel, but it “will never completely replace diesel or gasoline.”

Stewart, who drives a Honda Civic that runs on natural gas, said physics is the challenge. The methane that fuels his car is in a gaseous form and requires a lot more space for the tank, which he said takes up more than half his trunk. Even then, the tank is only equivalent to about eight gallons of gasoline. Plus, there are only a handful of places he can fill up and those options dwindle the farther away from Columbus he goes.

Chesapeake Energy, the leading player in the Utica Shale, and natural gas champion T. Boone Pickens have been promoting what they call “America’s Natural Gas Highway,” a system of liquefied natural gas, or LNG, stations aimed at the long-haul trucking community.

LNG gets around the space issue, but it must be cryogenically cooled to stay in its liquid form, which makes it more expensive to fill up ($2.92 for a diesel gallon equivalent) but also pricier for truck manufacturers whose tanks must be designed to keep the LNG incredibly cold. There is one active LNG station in Ohio, near the intersection of Interstates 71 and 76 by Akron.

Industrial use and a shift in power generation to natural gas are going to be what eases pent-up supplies, Stewart said.

Conley doesn’t think a share of the passenger vehicle market is out of the question. After all, Ford Motor Co. announced earlier this month that it sold 11,600 natural gas vehicles in its 2012 model year, more than three times what it sold in 2010. But he said it needs to start with a public-private partnership that grows out the infrastructure.

“In the ’80s and ’90s, there used to be questions about if this vehicle would be reliable and practical and safe and all those things,” he said. “I think those questions are behind us now.”