AEDC pushes CNG rebate program

A rebate program announced Friday (Aug. 5) could help boost business or auto dealers and natural gas utilities that have made investments promoting and providing compressed natural gas to fuel vehicles.

The Arkansas Energy Office (AEO), a division of the Arkansas Economic Development Commission (AEDC), has begun the Compressed Natural Gas Conversion Rebate Program with $2.2 million in federal stimulus dollars. The new program provides an incentive for fleets to purchase and/or convert their Arkansas-licensed vehicles to compressed natural gas (CNG).

Rebates, according to an AEDC press release, are available on a first-come, first-served basis until December 2011 or until funds are depleted.

“One of the hurdles to increasing the use of alternative fuels is building or converting infrastructure to make these fuels economically feasible,” Gov. Mike Beebe said in the statement. “This program will encourage use of less-expensive American fuel that helps Arkansas’s economy. Making compressed natural gas a more viable option for vehicle fleets can also reduce our dependence on foreign oil.”

The gasoline equivalent cost of compressed natural gas is roughly $1.07 a gallon. Fuel mileage is equivalent. A CNG user buying 200 gallons of fuel a month will spend $214, while a gasoline vehicle owner with the same amount of fuel will spend — at $3.50 per gallon — $740. Annualized, that comes to a savings of $6,312, and CNG proponents also claim that natural gas motors require less maintenance.

Rebates of 50% of the conversion cost or the incremental cost of purchasing new CNG vehicles would be given directly to fleet operators following the conversion to, or purchase of, compressed natural gas vehicles. Rebate amounts depend on the cost of conversion or incremental cost of a CNG vehicle, but rebates cannot exceed $25,000. To ensure rebates are available for multiple fleets, no single entity may receive more than 20% of the CNG rebate fund.

Eligible entities include cities, counties, school districts, and private fleets of at least 10 vehicles.  A minimum of four vehicles in the fleet must be converted. Eligible vehicles are Light; medium and heavy-duty vehicles, traditional mass transit buses, and school buses.

“I think it’s a very good first step, and it’s geared toward fleets which I think is the best way to begin it,” said Mike Callan, president of Fort Smith-based Arkansas Oklahoma Gas Corp. (AOG), which opened Arkansas’ first private CNG fueling station in Fort Smith earlier this year.

Callan said AOG recently submitted proposals to the city of Fort Smith so officials could conduct a CNG feasibility analysis.

Smith Chevrolet in Fort Smith is one of the few but growing number of dealerships in the country to obtain the training and certifications necessary to install CNG conversion kits. Smith is working with AOG to promote CNG use.

John Robben, general manager of Smith Chevrolet, has said the average CNG kit cost on a Chevrolet light duty truck is $10,700. Costs vary for different makes and models, with the range being between $6,000 and $18,000.

Callan, who drove to Friday’s rebate program press event in Little Rock in a CNG vehicle, getting more private and public fleets converted “will certainly generate the momentum” needed to feed investments in CNG infrastructure.

The state’s energy office is also working to boost infrastructure by increasing the number of public CNG stations in the state, which now number just 3. In addition to the $2.2 million rebate, the energy office is dedicating $470,000 toward the development of at least two CNG refueling stations. The $470,000 will be provided through $400,000 in remaining Oil Overcharge Funds and $70,000 provided from Senate General Improvement Funds.

“The AEO will partner with public and private entities on the installation of the two stations and is currently accepting applications based on factors such as overall impact, leveraged funds, energy and emissions reductions and job creation,” noted the AEDC statement.