Tax law changes resulting from federal legislation avoiding the fiscal cliff could significantly improve the cost savings of using alternative fuels in vehicles – good news for advocates of increased use of compressed natural gas (CNG).
Prior to the tax law change, state governments and the trucking industry were moving to use more CNG vehicles because of lower comparable fuel prices and less maintenance. But with a tax law change that has essentially lowered by 50 cents the gasoline gallon equivalent (GGE) of CNG, more governments, businesses and individuals could switch to CNG, said Mike Callan, president of Fort Smith-based Arkansas Oklahoma Gas Corp.
“We are proud to announce the CNG price for a gasoline gallon equivalent at AOG's fueling station located at 2100 S. Waldron Road in Fort Smith, AR. is now $0.96,” Callan noted in an e-mail to our content partner, The City Wire.
Callan said the roughly $2 difference per gallon between gasoline and CNG “certainly accelerates a pay-back.”
During a November natural gas summit held in Arlington Va., by the American Trucking Associations, several fleet operators discussed the savings of using CNG when the diesel price was near $1.50 per GGE.
A UPS spokesman said then that the company was realizing a savings of $1.50 per diesel gallon equivalent (DGE) on its fleet of nearly 50 LNG tractors. Trucking company C. R. England said it is was experiencing savings of 70 cents per DGE on its test vehicles.
Several speakers at November’s ATA summit said the savings was more than enough to justify switching to natural gas. Even counting the cost of engine conversion from diesel to natural gas, the return on investment could be counted in months instead of years, was the broad sentiment expressed at the summit.
Truck manufacturers like Navistar, Volvo and Kenworth have greater displacement natural gas engines which will be rolled-out in 2014 and 2015, thereby permitting natural gas carriers to carry heavier and longer loads than is now available. Service and maintenance facilities are also being upgraded to handle natural gas engine operation and repair.
Callan said AOG has 53 CNG vehicles and plans to add eight more in 2013. The public fueling station operated by AOG – the first in Arkansas – is also seeing more use.
“We estimate we have 100 non-AOG vehicles fueling. Currently the sales to the public is averaging approximately 6,400 gasoline gallon equivalent per month,” Callan explained.
Callan and other alternative fuel advocates have plans during the 2013 General Assembly to pass legislation providing further incentives for CNG use and for building CNG fueling stations.
“The legislation we are looking at running would provide an incentive in the form of a tax credit for purchasing a CNG vehicle or converting a vehicle to CNG … and a tax credit incentive for building a fueling station,” Callan said. “We are still refining the numbers and haven’t settled on the incentive levels. The proposal is modeled after legislation passed several years ago in Oklahoma.”
THE OKLAHOMA PUSH
Oklahoma has been a leader in CNG use. Oklahoma Gov. Mary Fallin (R) and Colorado Gov. John Hickenlooper (D) were leaders in what became a 22-state “bipartisan” effort to convince major automakers to build more affordable compressed natural gas vehicles. Arkansas joined the effort in late 2012.
“Our two state fleets have well over 10,000 cars and trucks between them,” Fallin noted in an “Oklahoma Now” column released Oct. 1. “Introducing CNG vehicles to these fleets will save taxpayer dollars on fuel costs and encourage the creation of CNG infrastructure and fueling stations.”
The effort resulted in bids from Ford, Chrysler, General Motors and Honda that resulted in a range of savings between 4% and 16% for CNG vehicles sold to state fleets.
Fallin recently announced that Oklahoma’s Department of Transportation added 160 compressed natural gas vehicles to its fleet. The state buys about 700 vehicles a year, and Fallin said she wants more of those to be CNG. The 160 CNG vehicles cost $5 million, and state officials estimate savings of about $20,000 over the life of the vehicle in fuel and maintenance costs.
ODOT officials say they want to replace more than 90% of the department’s fleet vehicles with CNG vehicles in the next three years.
Oklahoma officials have also worked with the private sector to encourage construction of CNG stations. The state is expected to have 100 CNG fueling stations by the end of 2013, well ahead of the 31 stations in 2010. According to the industry, 100 stations would allow CNG users to travel anywhere in the state.
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