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Truck-fleet shift to natural gas picks up steam

Copyright © 2012 Albuquerque Journal

Aztec Well Servicing in Farmington plans to convert its entire fleet of 121 trucks and many of its 13 drilling rigs from diesel to natural gas.

The company, which employs about 750 people in the San Juan area, also will open Farmington’s first compressed natural gas (CNG) fueling station in early 2013 to service its own fleet, and to sell natural gas to the public.

Aztec Executive Vice President Jason Sandel said the company wants to lead by example.

“We need to put our money where our mouth is to demonstrate the value of natural gas as a legitimate fuel source for our nation,” Sandel said. “We see it as the wave of the future.”

Aztec is part of a growing national trend by commercial fleet operators to convert vehicles to natural gas. They are spurred on by extremely low prices, the prospect of abundant supplies well into the future, and growing public support for cleaner-burning fuels.

The trend includes companies large and small, but energy companies are taking a leading role, said John Davis, business development manager at Williams Companies Inc., a natural gas firm headquartered in Oklahoma.

Williams plans to convert all of its 1,600 vehicles nationwide to natural gas, including 230 vehicles it operates in the San Juan Basin.

Building demand

“We need to build demand for natural gas,” Davis said. “If gas companies aren’t driving natural gas vehicles, what does that say to the public?”

The natural gas industry hopes building demand will help shore up production in the San Juan Basin and other regions, where output is falling because of a market glut that’s driven prices down to a ten-year low, said Karin Foster, executive director of the Independent Petroleum Association of New Mexico. Business leaders also want to build long-term stability for the industry, which hopes to exploit vast new shale-gas plays in the U.S. for decades to come.

America’s Natural Gas Alliance and the American Gas Association launched an initiative last year to promote development and use of natural gas vehicles, fueling stations and other infrastructure throughout North America. More than 50 producers and distributors are participating.

Davis said favorable economics make it an easy sell. It costs $9,000 to $10,000 to convert a light pickup, but with natural gas selling at about $1.50 less per gallon than gasoline or diesel, the conversion rapidly pays for itself.

“We put about 20,000 miles per year on each of our vehicles,” Davis said. “We lease them, but the incremental cost to lease natural gas vehicles is less than the monthly fuel savings we get on each vehicle, so it’s really a no-brainer. And that doesn’t include savings on maintenance, because cleaner-running natural gas means you need fewer oil changes or engine work.”

Challenges remain

Still, many challenges remain. There are currently just under 1,100 CNG stations in the U.S., according to the U.S. Department of Energy. That’s up from about 700 in 2007, but in comparison, there are nearly 120,000 retail gasoline stations in the U.S.

New Mexico currently has only nine, but another four are expected in the Four Corners area next year. That includes the one planned by Aztec Well Servicing, which will spend about $500,000 to convert its Road Runner Fuels gasoline station on Highway 550 in Aztec.

“Efforts are under way to get three facilities in the Farmington metropolitan area by the end of 2013, but ours will probably come first,” Sandel said.

Apache Corp., a Texas-based oil and gas company, is also constructing CNG stations in Louisiana, Oklahoma, Texas and New Mexico. The company operates 12 stations now, and it will open eight more by December.

“We’ll have three in New Mexico by yearend,” said Frank Chapel, Apache’s natural gas transportation fuels director. “We’ve had one in Hobbs for about three years, and we just opened another station last week in Eunice. We’re building a third one now in Artesia.”

As more stations come on line, more commercial and public fleets could convert to natural gas.

Texas-based Waste Management Inc., for example, operates 1,400 natural gas vehicles nationwide, but so far, it has converted only one of its 176 trucks in New Mexico.

“We need to see broader deployment of CNG infrastructure to deploy more natural gas vehicles here,” said spokesperson Janette Coates.

Gov. Susana Martinez signed a memorandum of understanding with 12 other governors last year that commits them to buy more natural gas vehicles if automakers build more of them. In addition, the Energy, Minerals and Natural Resources Department has a $248,000 grant from the DOE to provide assistance to cities and counties that convert public vehicles to natural gas.

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