Navistar partnership with Clean Energy takes sting out of cost of NG-powered trucks

www.chinatrucks.com: Two of the biggest barriers to transitioning the long-haul trucking industry to inexpensive natural gas - the cost of the equipment and availability of the fuel - have been addressed through a new partnership between truck maker Navistar International and gas supplier Clean Energy Fuels.

The companies jointly announced this week a program that will allow a customer to purchase natural gas-powered trucks from Navistar at no more than the cost of a diesel equivalent and then pay for the technology through slightly inflated gas prices over a five-year period, while still enjoying fuel costs significantly lower than diesel.

To participate in the program, customers will have to agree to purchase most of their fuel through Clean Energy's rapidly growing US fueling network. Clean Energy has vowed to open 70 liquefied natural gas (LNG) fueling stations in the US by the end of 2012, with another 100 to follow in 2013. And for its part, Navistar has promised to develop a natural gas version of every one of its medium- and heavy-duty products, so customers can choose the product that best fits their requirements, making natural gas viable in virtually every trucking application.

Typically, natural gas-powered trucks cost $30,000-$40,000 more than their diesel equivalents. The higher up-front purchase price has prevented many fleets from making the transition to gas, even though the fuel costs about $1.50 per equivalent gallon less than diesel.

Under the Navistar/Clean Energy program, customers will commit to purchasing their natural gas through Clean Energy's facilities and will pay a premium on that gas for the first five years or until the incremental cost of the NG technology has been covered. For example, a trucking company that commits to purchasing 1,000 gallons of natural gas a month through Clean Energy may pay an extra $500 per month for a six-year period until it has covered the cost of the technology, all the while still paying considerably less than the cost of diesel. Ideally, the program will allow the industry to transition to natural gas-powered vehicles without relying on government handouts, explained Dan Ustian, chairman, president and CEO of Navistar.

"This is going to work far differently than any other program in this field for alternative fuels," he said. "It can stand on its own and stand very tall and that's why it's going to be successful."

Added Jim Hebe, senior vice-president of North American sales operations: "If you do business within this alliance of companies, your cost to go from diesel to natural gas is zero."

It's a compelling proposition, since the cost of natural gas is significantly lower than diesel and expected to remain that way. Trucknews.com asked Hebe if Canadian customers would qualify, to which he said: "We can make something work." In order to purchase a qualifying amount of natural gas through Clean Energy's US-based sites (it does have some stations located in B.C.), it would seem the program would best fit Canadian fleets running north-south routes.

The program has already won the support of a major US carrier, and it's a big one at that. Jerry Moyes, chairman and CEO of Swift Transportation was on-hand at the announcement and expressed an interest in taking part in the program. Moyes noted Swift buys about a million gallons of diesel every day and welcomes the opportunity to move to a less costly fuel.

"We're very excited about the potential of natural gas. We've been testing it for about a year with a couple different products and we like what we see," Moyes said. "There is a savings to it. We're very restricted on the product we can buy today, which is what is holding us back, but we're making progress in that arena...I think within three to four years (NG) could be up to 30-40% of our fleet."

Former oil tycoon turned natural gas crusader T. Boone Pickens was also at the announcement, commending both Clean Energy (of which he's a stakeholder) and Navistar for making gas more accessible to the long-haul trucking industry. He said new fracking technologies have made low-cost natural gas more widely available than ever before. He said there is at least an untapped 100-year supply of natural gas in the US.

"The cheapest fuel in the world is in the US, so this opportunity cannot go unused," he said. "We've got to get off OPEC oil and this is the first step to accomplishing that."

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