It’s no secret that natural gas is driving American energy policy. But the fuel has a long way to go if it is to actually drive the country’s transportation policy.

With gasoline prices nearing $4 a gallon, people are clamoring for relief. More drilling is one answer. But so too is shifting over to natural gas to move cars and trucks. There’s plenty of it in the ground, especially with newer drilling technologies that can access the once hard-to-get shale gas. While that obstacle has been overcome, others remain standing: The lack of fueling stations and the relative high cost of a natural gas vehicle compared with a conventional one.

Proponents of the idea say that compressed natural gas used for cars, buses and light trucks is about one-third the cost of gasoline. Right now there are about 110,000 natural gas vehicles on the road in the United States, nearly all of which are part of fleets.

“Every day we are sending $1 billion outside the country because of our addiction to oil,” said Richard Kolodziej, president of Natural Gas Vehicles for America. “We want Americans to know that there is an alternative, namely accelerating the use of domestic natural gas in vehicles instead of gasoline and diesel.”



The association is backing a bill before Congress called the Natural Gas Act, which  would provide significant subsidies to heavy truck fleets as well as commercial vehicles if they convert from a traditional combustion engine to one that could also burn natural gas. The measure has bipartisan support in both chambers.

The natural gas vehicle group says that the benefits would outweigh the costs, noting that trucks could run 650 miles before they would have to re-fill, which would reduce the level of harmful emissions as well as displace gasoline usage -- petroleum that is more-than-likely coming from abroad.

Opponents of the measure, conversely, are arguing that Congress has no special talent when it comes to deciding winners and losers. Currently, hybrid vehicles that run on both electricity and gasoline are popular while all-electric vehicles are trying to make headway. In the distant future, there’s hydrogen-powered cars that would have no emissions.

"When it comes to messed-up energy policy, technology mandates and subsidies are the problem, they're not the solution," says Ken Green, scholar at the American Enterprise Institute. "The knowledge of what works in markets is spread among the millions of people who make daily decisions on how they use energy: It does not reside in the heads of a few politicians, bureaucrats, or political appointees."

Government Role

At the same time, manufacturers and chemical makers are concerned that an increased demand for natural gas would drive up their energy costs. That would make them less competitive. The oil companies, meanwhile, also have a stake in the process. While some accuse them of blocking such progress, they are saying that they are willing suppliers of both oil and natural gas.

The reality is that government is involved in the energy business, and it always has been. When President Obama sets a goal of reducing the level of foreign oil imports by one-third over the next decade, he has to develop a comprehensive strategy. Part of that involves raising fuel efficiency standards. And part of that is trying to encourage the shift to cleaner vehicles through the use of incentives.

The federal government, the president says, will lead by example: It operates more than 600,000 fleet vehicles, some of which have already been converted to hybrids. But the president said that he will direct all federal agencies to start purchasing alternatively-fueled vehicles by 2015.

Obviously, a lot of work needs to be done. For starters, the infrastructure to support those natural gas-fired vehicles is not pervasive. Only 1,000-1,500 filling stations exist across the country, which makes driving long distances impractical. Beyond that, the tanks hold less fuel while consumers don’t have a lot of product choices: The Honda Civic, and just this week GM said it would deliver bi-fuel smaller trucks that run on both compressed natural gas and gasoline.

Transit buses now account for about 62 percent of all vehicles that use compressed natural gas, says the natural gas association. But it will be the heavy trucking fleets that set a potential trend as they are the ones burning the most fuel and spending the most money to do so. That’s why Congress would first target those 18-wheelers, which would need their engines modified. 



Those trucks would run on liquefied natural gas (LNG), as opposed to compressed natural gas. But LNG trucks cost double that of standard diesel trucks, says American Trucking Associations Chief Executive Bill Graves, who has testified before Congress on this issue. But the potential savings is huge, he adds, which is why his members are pushing lawmakers to pass the Natural Gas Act.

“Congress should enact natural gas vehicle tax credits to offset the significant cost differential between diesel trucks and trucks that operate on LNG,” he says. “This could facilitate the economies of scale in production of these heavy trucks to bring the initial costs down.”

Natural gas vehicles have a long road ahead of them. But if they are to find favor in the market, now is the time.

EnergyBiz Insider is the Winner of the 2011 Online Column category awarded by Media Industry News, MIN. Ken Silverstein has also been named one of the Top Economics Journalists by Wall Street Economists.

Follow Ken on  www.twitter.com/ken_silverstein

energybizinsider@energycentral.com



Industry thought leaders will be discussing this topic and more at the upcoming EnergyBiz Leadership Forum, Harnessing Disruption, taking place in Washington D.C., March 19-21, 2012. Review full conference details by visiting www.energybizforum.com