As diesel fuel hovers near $4 per gallon, haulers see savings in compressed natural gas. The switch carries some big upfront costs.
The noisy, smoke-belching garbage truck is getting a makeover that may signal an important shift in how large commercial vehicle fleets are powered.
At least four Twin Cities-area garbage haulers, led by Randy's Environmental Services of Delano, are trading in diesel-powered trucks for new ones that run on compressed natural gas, or CNG.
It's no easy switch. Companies making this leap usually must install costly refueling stations. But the payoff comes from lower-priced natural gas -- currently the equivalent of $2 per gallon below diesel fuel, which hovers around $4 per gallon.
"It makes sense," said Jim Wollschlager, director of operations for Randy's, a suburban operator that in October became the first waste hauler in Minnesota to run CNG vehicles.
Trash trucks typically drive 100 or more miles a day, and the heavy, hydraulics-laden vehicles get less than 3 miles per gallon, regardless of the fuel.
Across the country, renewed interest in natural gas as a motor fuel is coming from trash haulers, transit agencies and local delivery services. These vehicles typically return to a base each night where they can be plugged into a CNG filling station, experts say.
"You think of a garbage truck -- they go in a circle and they use a lot of fuel," said Graham Mattison, a Boston-based analyst for Lazard Capital Markets who sees momentum for the industry because new drilling techniques are reaping bountiful, low-cost natural gas.
When used as a motor fuel, natural gas is pressurized to 3,100 pounds per square inch and pumped into a vehicle's Kevlar-reinforced tanks. A liquid version of the fuel also is used in heavy vehicles, though CNG is more common.
About 112,000 natural-gas vehicles are on U.S. roads, an industry trade group says. That represents a small share of the vehicle market, but sales are projected to grow 25 percent a year through 2016, according to Pike Research, a Boulder, Colo., firm that analyzes energy trends.
The nation's largest supplier of garbage and cement trucks, McNeilus Cos., based in Dodge Center, Minn., says 30 percent of trash trucks are ordered with natural gas engines. The company expects that share will be more than 50 percent in five years.
New Flyer Industries recently produced its 4,000th CNG-fueled transit bus at its Crookston, Minn., plant, and will add CNG production capability at its St. Cloud plant next year.
In the Twin Cities area, Dick's Sanitation of Lakeville, Waste Management's Blaine operation and Ace Sanitation of Ramsey also say they are acquiring CNG trucks that will be on the road next year. Each hauler is investing in a refilling station, which can cost more than $1 million, and all have plans to acquire more CNG trucks as older diesel equipment is retired.
"We really like the fact that natural gas is a domestic fuel and it is something we can do to reduce our dependence on foreign oil," said Wollschlager, who added that the trucks also run far quieter than diesels.
Why the shift?
Several things are behind the shift to natural gas.
Big, powerful engines designed strictly for natural gas have been available for several years from Cummins Westport Inc., a Vancouver-based venture that specializes in alternative and clean-burning fuel technology.
"That was the game-changer," said Jeffry Swertfeger, director of marketing and communications for McNeilus, which has been offering CNG trucks since 2006.
At the same time, new cleaner-burning diesel engines have gotten more expensive to purchase and maintain -- though the new CNG trucks with their costly tanks still carry a higher price tag, Wollschlager and others said. Federal tax credits helped boost the industry, but have an uncertain fate in Congress.
Wollschlager said Randy's CNG equipment will pay for itself over seven to eight years. The company hopes that savings on fuel and maintenance will cover the $1.2 million investment in a fueling station and $200,000 in safety upgrades to its maintenance garage, Wollschlager said.
Mattison of Lazard Capital said he believes CNG, even without tax credits, will remain a cost-effective fuel for many fleets with return-to-base operations. When Cummins Westport introduces a larger engine in 2013, operators of heavy tractor-trailers will begin looking at CNG, he said.
"The big factors are the [price] spread on fuel and how many miles you drive," he said.
Been here before
This is not the first burst of enthusiasm for natural gas fuel.
After an industry surge in the 1990s, oil prices dropped, and some early adopters grew frustrated by the performance of first-generation CNG engines and the limited availability of refueling stations. Even today, Minnesota has just one retail refueling station, operated by CenterPoint Energy in south Minneapolis.
Xcel Energy Inc., an electric and natural gas utility based in Minneapolis, once ran a large fleet of CNG vehicles in Minnesota, but even its interest waned. CNG vehicles weren't replaced when they were retired, an Xcel official said.
Minnesota Valley Transit Authority, which serves Rosemount, Burnsville and Apple Valley, had the same experience -- its handful of CNG buses purchased in 1999 were retired a decade later and replaced with diesel models. Metro Transit has considered CNG buses but concluded the fuel savings didn't justify the investment, spokesman John Siqveland said.
The lack of places to refuel remains a challenge for the industry, whose trade association, Natural Gas Vehicles for America, says just 1,000 natural gas stations exist in the United States.
Some companies, including one partly owned by Texas billionaire T. Boone Pickens, are investing in stations, with the aim of creating CNG-ready transportation corridors between cities. Pickens is lobbying Congress for incentives to help shift the nation's trucks to natural gas.
As for passenger cars, Honda sells a CNG Civic, and home filling stations are available. But there's little or no financial gain for most drivers -- and potentially lots of hassle finding fuel on the road. Even the industry's trade group doesn't spend much time touting natural gas passenger cars, though its president says he owns one.
"Consumers require a refueling infrastructure we don't have yet," said Richard Kolodziej, president of NGVAmerica. "The focus is on vehicles that use a lot of fuel."
David Shaffer • 612-673-7090