Fleets Say Natural Gas Is Cost Competitive in Spite of Large Equipment Premiums

This story appears in the July 8 print edition of Transport Topics.

WASHINGTON — From a dollars and cents viewpoint, natural gas is an effective alternative to diesel, early adopters of the fuel insist.

Fleets including Paper Transport Inc. and Bison Transport, shippers such as Frito-Lay and Procter & Gamble and truck lessor Ryder System united in their support of the emerging fuel choice at the Alternative Clean Transportation Expo here.

Their conclusions were based on criteria including cost per mile, ownership costs, fuel benefits, lower emissions and other “savings.”

Jeff Shefchik, president of Paper Transport, calculated that using natural gas in tractors saves the company 3 cents a mile, or $3,300 per truck annually, when all costs such as fuel and maintenance are considered.

“The reason we are very bullish on natural gas as a transportation fuel is that we think the cost of the truck will go down, fuel economy will be better and the cost of diesel will go up,” he said. “I am investing in natural gas because, in the future, the savings will be 10 to 15 cents per mile.”

Shefchik stressed that benefit calculations were influenced by individual company situations, as well as fluctuating diesel costs, which can make it difficult to generalize about comparisons.

Trevor Fridfinnson, vice president of Western operations for Winnipeg, Manitoba-based Bison, outlined test results for 15 LNG tractors running between Calgary and Edmonton, Alberta.

“The next few months are going to be critical,” Fridfinnson said, noting that payback periods likely will be extended to three years or more from the initial two-year plan because some test results such as fuel economy didn’t meet expectations.

He said test results showed a 15% to 17% drop in fuel economy compared with diesel, more than the company had expected.

Fridfinnson also noted that maintenance costs were about 4 cents per mile higher but are expected to decline.

“We have seen a tremendous amount of demand” for Volvo and Navistar natural-gas tractors, said Scott Perry, vice president of supply management for Ryder Fleet Management Solutions. “The stars haven’t aligned in every area [for natural-gas fuel] but where it has, it is very meaningful,” he said.

Perry said he expects costs to drop 20% over the next four years because technology, competition and efficiencies of scale continue.

Ryder’s maintenance costs are running at a very small differential of about 1.5 cents higher per mile than diesel, he said.

From the shipper side, Sean Turner, a purchasing group manager at Cincinnati-based Procter & Gamble, said, “We found savings and people willing to commit to lanes.”

The consumer products maker buys 800,000 annual freight loads and last month committed to running 20% of miles with natural gas.

Joe Gold, fleet asset and engineering manager at Frito-Lay, Dallas, estimated that the snack-food company would save about 1.5 million gallons of fuel annually by using natural gas instead of diesel.

Other shippers identified benefits, too.

“We are very excited about where we are going,” said Robert Hedges, fleet and facilities manager at Monarch Beverages, based in Indianapolis. Monarch is converting its fleet to compressed natural gas.

Hedges illustrated costs by noting that Monarch’s costs were about $1.75 per diesel gallon equivalent, a significant savings from other commercially available prices of about $2 or more. Diesel typically costs about $1.50 per gallon more than natural gas.

The company expects to reduce emissions by 1,500 to 2,000 pounds annually after fully converting its 110-tractor fleet, Hedges said.

Hedges and Perry raised another important question — how to determine residual value of natural-gas tractors, a key factor that has to be taken into account when a new unit is bought. There is no method for determining those values now because none of the tractors has hit the used truck market yet.

Mike Lickert, corporate fleet manager for Pittsburgh-based grocer Giant Eagle, said “performance of the natural-gas trucks is on a par with diesel.”

He didn’t share comparative cost data for his fleet, but he did illustrate a different cost.

“Training is very important,” he said, recounting what he described as a “horror story” if a natural-gas truck breaks down on the highway and drivers or technicians can’t fix it.

Turner also said financial benefit calculations produce unexpected outcomes.

“Finding a [cost-saving] formula proved difficult to do,” Turner said, so the company chose to stress a different value for natural-gas friendly fleets — the ability to lock in long-term business volumes.