Obama Touts Natural Gas for Trucking

This story appears in the March 12 print edition of Transport Topics.

MOUNT HOLLY, N.C. — President Obama proposed a federal tax credit designed to encourage the trucking industry to move toward natural-gas and electric vehicles by helping underwrite their higher acquisition costs.

Obama said here on March 7 his administration would work to create the tax credit equal to 50% of the additional costs incurred by companies that purchase the alternative-fueled vehicles. He proposed keeping the credit in place for five years in order to spur acceptance of the new models.

“You and I both know there are no quick fixes” to rising fuel costs, he told a vocal and supportive group of workers from the Daimler Trucks North America Freightliner factory, the day he proposed the tax credit.

He urged the workers to ignore hollow pledges by politicians to lower the price of fuel and said his plans would offer long-term solutions by reducing demand for petroleum in the United States, the world’s largest consumer of oil — with much of it imported from other nations.

The same day, Obama also proposed a $1 billion pilot project to encourage communities to speed the regulatory process for companies that seek to install fueling stations for the alternative-fuel vehicles and offer incentives to get local companies to invest in lower-emissions vehicles.

There has been a flurry of activity in the medium- and heavy-duty trucking market involving natural-gas-powered vehicles in recent months.

While the fuel for these vehicles — which mostly comes from domestic sources — is substantially cheaper than petroleum, truck acquisition costs are on average $35,000 to $40,000 higher for a Class 8 tractor.

Fleet executives said the higher purchase prices erase most of the benefits of lower fuel prices in many trucking applications.

The Mount Holly plant produces vehicles in the Class 6 through Class 8 range, among them trucks powered by natural gas.

Obama praised the natural-gas trucks that are produced here, telling the workers they are quieter, “better for the environment . . . [and] cheaper to fill up than they would be with diesel.”

He noted that Mount Holly had recently produced Daimler’s 1,000th U.S. truck powered by natural gas, “the first company to reach that milestone.”

The president also noted that more than 1,000 workers recently had been added to the plant’s payroll — when DTNA began adding employees to a second shift to meet growing demand late last year.

“We’ve recalled every employee who’s ever worked here and was eligible to return,” Roger Nielsen, DTNA’s chief operating officer, said during a press briefing before Obama’s visit. Now, he said, the company is hiring new workers for the first time in years.

While Daimler officials said diesel was still the primary power source for commercial trucking, they praised the new initiative.

“What I like is that we have a government directive toward more fuel efficiency,” said DTNA President Martin Daum.

Separately, Olof Persson, CEO of Volvo AB, told Transport Topics that while he didn’t have the details of the tax-credit plan, “I think that incentives in order to get technology going is definitely something that can be valuable in order to get the right attention and also pushing things in the right direction.”

Another truck maker, Navistar Inc., recently unveiled a joint program with natural-gas supplier Clean Energy Fuels Corp. to underwrite the additional acquisition costs of such vehicles when fleets commit to buy their fuel from Clean Energy (2-6, p. 1).

Oil prices have been rising sharply, and the average price of a gallon of retail diesel is more than $4 a gallon.

By contrast, fuel suppliers say the equivalent amount of compressed natural gas today is about $2.50, some $1.50 a gallon lower than diesel.

Meanwhile, Obama praised DTNA’s participation in the Department of Energy’s SuperTruck in-itiative, which has the goal of improving fuel efficiency in over-the-road trucks by 50% by 2015.

Reaching that goal, he told the factory workers, would mean fleets could “save $15,000 every year” per truck. “I want people to think about what that means for businesses, what it means for consumers. It is real progress.”

Heavy-duty trucks currently average about 7 miles per gallon on the highway but are likely to be averaging 10 mpg in the not too distant future, said Wilfried Achenbach, DTNA’s senior vice president of engineering and technology.

DTNA currently uses natural-gas engines only from Cummins and companies that partner with Cummins.

Daum said there were no plans at present to have its Detroit subsidiary build natural-gas engines.

Cummins and its partners provide “a great product. . . . Why should I spend money to mimic someone?”

Navistar and Volvo, however, are both working on natural-gas versions of their engines, and Navistar has pledged to offer natural gas on all their models by the end of 2013.