TAMPA — Truck driver Michael Soto has a front-row seat for a phenomenon that's changing America. You just might not hear him coming.
The Miller Lite truck he drives for beer distributor J.J. Taylor Distributing is fueled by compressed natural gas (CNG) instead of diesel. Gone is the familiar chug of a diesel engine, replaced by a mild hum. Gone as well are the side fuel tank, the diesel fumes and the smelly hands whenever it's time to refuel.
A large rectangular natural gas tank plopped behind his cab forces him to rely exclusively on the side mirrors. But that's a minor issue to Soto. He enjoys silently weaving through St. Petersburg neighborhoods to make stealth deliveries to bars and 7-Elevens. "They say, 'When did you get here? Is it (turned) on?' "
An abundance of cheap natural gas has transformed America's energy industry and given a shot in the arm to the economy. It has blunted the country's reliance on foreign oil, while giving American industry a huge advantage over major competitors overseas. European companies pay almost three times as much for natural gas as their America counterparts; Japanese companies pay even more.
The natural gas boom has also made it easier for utilities to ditch dirtier coal plants and torpedoed — or at least delayed — construction of new nuclear power plants, which utilities used to promote as their lowest-cost energy option. (In closing its crippled nuclear plant in Crystal River, Duke Energy cited construction of a new natural gas plant as a likely alternative.)
Jeff Korzenik, chief investment strategist for Fifth Third Bank, dreams big about how natural gas is poised to revolutionize the transportation industry as well. It's not only cheaper than diesel but also better for the environment, burning about 30 percent cleaner than petroleum products.
"This is the next Internet in terms of the opportunity to potentially transform the U.S. economy," Korzenik said, predicting broad acceptance of natural-gas-fueled trucks could lead to widespread use of other natural-gas-powered vehicles.
"It doesn't mean it's going to happen. It may be 10 years or 20 years away,'' he said, "but the economics support the trend."
It may not take 10 years.
U.S. Sugar, Lowe's and UPS are among those that have switched or are actively considering switching their Florida fleets to natural gas.
The city of Clearwater built the first public CNG station in Florida for use by city-owned vehicles, and municipalities like Fort Myers may follow suit. The Hillsborough Area Regional Transit Authority (HART) has purchased its last diesel bus and will transition its fleet to CNG in 2014.
Keith Gruetzmacher, senior manager of marketing services for Peoples Gas, said there have been false starts before hinting that natural gas would become the fuel of choice, most recently in the '90s. In the past, an eventual spike in natural gas prices quickly dampened enthusiasm.
This time, Gruetzmacher says, is different.
"People are going all in," he said. "It's all coming together and the momentum is unbelievable."
Leon County's school district is going all-natural-gas for its buses. Following the lead of waste haulers in Lakeland and Sarasota, the city of Tampa rolled out five new CNG garbage trucks last week with plans to add five more to replace aging diesel trucks by 2014. (The trash startups, Gruetzmacher said, prompted an initial period of confusion and bemusement for some homeowners who forgot to run their trash to the curb because they didn't hear the low-noise CNG garbage trucks entering their neighborhoods.)
In tandem with the trucks, a network of fueling stations is expanding.
So far, there are only 32 natural gas stations operating across Florida — including one at Tampa International Airport available for public use — but that could accelerate quickly. The Pilot Flying J truck stop chain plans to open natural gas fueling stations within 200 miles of each other in Florida.
Clean Energy Fuels Corp., the country's biggest provider of natural gas for transportation, is also building its own station network around the country. The company, whose largest investor is energy tycoon T. Boone Pickens, aims to build a couple hundred liquified natural gas (LNG) filling stations along large U.S. interstates placed about 250 miles apart.
The cost equation
In deciding whether to switch, companies have to weigh any savings from cheaper fuel versus the higher cost of natural-gas-powered vehicles.
After crunching the numbers, beer distributor J.J. Taylor decided to replace its 95-rig fleet in Tampa and install its own $1.2 million natural gas fueling station supplied by TECO Peoples Gas.
Richard Sykes, the distributor's fleet manager in Tampa, estimates it will cost about $7.5 million to install the fuel station and switch to the new trucks. Each new vehicle the company leases long-term costs about $140,000 compared to $79,000 to buy a new diesel truck.
Fillups are roughly half the cost, about $2-a-gallon compared to diesel's $4-a-gallon. Even with a sharply higher upfront costs for natural gas trucks, Sykes figures there will be a payback in fuel savings within three or four years.
So far, almost half of J.J. Taylor's Tampa fleet has been switched over; the rest will be replaced by CNG models within 36 months.
"We can do it. We're a big fleet," says J.J. Taylor corporate vice president of administration Jose Rivera. "The small guy doesn't have the capital to make the bet we're making."
To spur more truckers to follow suit, a coalition of natural gas utilities and producers called the Drive Natural Gas Initiative recently launched the "natural gas fleet savings calculator" (available on the Web at aga.org) so fleet owners can predict potential savings. "Any fleet owners interested in putting less money into their fuel tanks and more money into growing their businesses should consider what natural gas can do for them," said the initiative's executive director, Kathryn Clay.
Fuel savings could grow even wider, speculates Eric Criss, president of the Beer Industry of Florida and chairman of an advocacy group called the Florida Natural Gas Vehicle Coalition. He notes that about 80 percent of the cost of diesel fuel is in the oil itself and the rest is tied to transportation, refinery costs, and taxes. For natural gas fuel, that's reversed with only 20 percent of the cost tied to natural gas itself.
It stands to reason, Criss said, that any greater efficiency in getting fuel into the vehicles will make natural gas even cheaper.
Subsidies in play
Government could play a key role, possibly floating incentives to remove the single biggest obstacle holding back a broader switchover: natural-gas-powered trucks are nearly twice as expensive to buy as diesel trucks.
President Obama wants Congress to give companies that invest in natural gas trucks a tax credit equivalent to about 50 percent of the cost difference between natural gas-powered vehicles and those using standard diesel.
On the state level, the Florida Natural Gas Vehicle Coalition — backed by state Sen. Wilton Simpson, R-Trilby, and Rep. Lake Ray, R-Jacksonville — is pushing for incentives as well.
Under the proposed state legislation, truckers using natural gas would no longer pay to put a decal on their windshield annually. Instead, natural gas would be taxed at fuel stations similar to diesel with the fees put into an investment fund.
The program is expected to raise about $12 million a year to be used as incentives subsidizing the cost of buying a natural gas truck.
David Rogers, executive director of the Florida Natural Gas Association, described the investment fund as providing a "jump-start" to making the switch. "This isn't really a tax increase, per se," he said. "The program would go away after five years."
An initial economic impact study commissioned by the coalition concluded the incentives could create over 10,000 jobs and $300 million in new wages. That analysis was based on 90 new natural-gas-powered trucks added to Florida's highways annually over the next 20 years.
A week ago, a revised study from economist Hank Fishkind came out, boosting the estimate dramatically: more than 20,000 new jobs, $715 million in new wages and a $2.5 billion impact overall in just five years instead of 20.
"The only thing holding us back now is the cost differential between engines," said Criss "If we can get the vehicles on the road, people will build the fueling stations. It just happens."
UPS, a frontrunner in the natural gas revolution, is one of the companies sitting on the sidelines in Florida.
A pioneer in using natural gas fuel dating back to 1989, UPS now has a fleet that includes more than 1,000 CNG trucks and about 100 heavy duty tractor-trailer trucks using LNG. None of its CNG or LNG trucks are rolling in Florida.
The delivery giant is eager to add to its LNG fleet, spokeswoman Kara Ross said.
She wouldn't say whether the lack of a state incentives is the main holdup in Florida. But UPS has embraced such incentives in other states where it has switched its trucking fleet to natural gas, and it's an ardent advocate of Florida following suit.
Jeff Harrington can be reached at [email protected] or (727) 893-8242.