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Natural gas touted as the next alternative fuel in San Diego

“I’m not proud of it, but I’m a reformed diesel guy,” said Andrew Douglas, senior VP of sales and marketing at Agility Fuel Systems of Santa Ana, California.

Douglas was among the dozens of attendees at the L-NGV2015 conference in San Diego last week, a gathering mostly aimed at the compressed natural gas (CNG) and liquefied natural gas (LNG) industry. Agility retrofits tractor-trailers to run on CNG, and has produced 25,000 such vehicles since it was founded in 1996.

cylinder_stackMore and more companies are converting to CNG: In the early years the customers were mostly city transit buses and garbage trucks, but the shipping sector is taking advantage of systems that can stash more fuel on board and propel the big trucks longer distances. On the company’s new Saddle Creek Gen 5 model, four cylinders of CNG totaling 160-gallon diesel equivalent are stacked up behind the driver’s cab. The setup weighs more than 3,000 pounds, but it can travel 750 to 850 miles without refueling.

But the industry has challenges: Douglas said the goal is to get 10 percent of the nation’s heavy-duty trucks running on natural gas by 2020. The cost of such vehicles is steep, although Agility says companies can make that money back within 2 years.

“Eighty years ago there was a transition to an alternative fuel going — diesel,” he told a conference room of about 40 people. The industry is seeing a migration to a “new alternative fuel,” natural gas. Just as decades ago, price is the motivator.

Diesel is averaging about $2.86 a gallon, compared with $2.11 for CNG.

“I think we’re seeing an evolution to a cheaper fuel source, in this case, natural gas,” he said.

Later, showing off one of Agility’s behind-the-cab systems on a Frito-Lay truck in a cavernous room of the San Diego Convention Center, Douglas talked about being a trucking guy at heart, trying to convince trucking companies to switch away from a fuel that has been synonymous with big trucks for decades.

“Sometimes you have moments of doubt. And whenever I go there, I think to myself, No matter what the obstacles are, it’s about the price of fuel — or the differential (between NG and diesel). That’s what’s going to drive this.”

CNG truck22Fuel Freedom Foundation co-founder and chairman Yossie Hollander presented on the same panel as Douglas and Greg Roche from Applied LNG of Westlake Village, California. Hollander praised CNG and LNG, saying it’s going to be a “sustainable business for a long time.” But he reminded the panelists that the market for light-duty vehicles is 3.5 times bigger than the market for larger vehicles. “That’s the larger market here.”

One solution is to make liquid alcohol fuels, like ethanol and methanol, out of natural gas. Those fuels can run in many of the vehicles Americans drive already, without the need to buy a new vehicle or undertake an expensive conversion.

Fuel Freedom seeks to open the fuels market so all fuels, including CNG, LNG and alcohol fuels, are available to the consumer, not just gasoline. “We don’t have favorites,” Hollander said. “What we want is a supermarket.”

Natural gas center of attention at L-NGV2015

We’re headed to the L-NGV2015 conference in San Diego, where natural gas will be in the spotlight.

Natural gas has been getting a lot of attention lately, because the United States is producing so much of it. As Jude Clemente wrote in Forbes earlier this month:

U.S. proven natural gas reserves continue to soar to record highs. We now have some 360 Tcf [trillion cubic feet] of proven gas in the ground, recoverable under current market conditions, experiencing increases of 5-8% per year. Driven by the Marcellus shale play in the Appalachian Basin, Pennsylvania and West Virginia have registered the largest gains, with both state reserve totals more than quadrupling since 2010. In fact, Pennsylvania and West Virginia have accounted for about 60% of new U.S. gas reserves since 2008, although mighty Texas continues to plug along, upping its reserves by 20% since then.

The surge has occurred despite a steady decline in prices. Henry Hub spot prices are about $2.80 per million British Thermal Units, down from an average of $8.86 per MMBtu in 2008, as Clemente notes.

NG is running about 70 percent lower in price than the equivalent amount of oil, even with oil’s precipitous drop from last summer. That’s what makes natural gas an attractive alternative for transportation fuel.

Much of the discussion at L-NGV2015 will center on compressed natural gas (CNG) and liquefied natural gas (LNG), which is being used in municipal fleets (official vehicles and transit buses) and industrial trucking (delivery, garbage-hauling) around the country. These fuels not only cost less than gasoline and diesel, they burn much cleaner, which is better for air quality and the environment.

Natural gas can also be converted into alcohol fuels to run in the cars, trucks and SUVs driven by the rest of us.

NG is “very, very cheap, and we need to take advantage of that,” Fuel Freedom co-founder and chairman Yossie Hollander said recently during a discussion about energy in Israel. “The greatest opportunity is a transportation one. Using a natural-gas product, whether compressed natural gas, liquid natural gas, ethanol from natural gas – you can make ethanol from natural gas, and another fuel called methanol – if we use all of them in transportation to replace oil, this will replace a $3 trillion industry around the world.”

We’ll be presenting more about this topic at L-NGV2015. Check out our Twitter feed (@fuelfreedomnow) for regular updates.

API and ethanol — A musical match made from memory

Every time I get depressed about the world — and there is plenty to get depressed about — API (American Petroleum Institute) issues a silly press release that, in its confusing presentation and content, brings back a romantic song from my past. Because of API, over the last few years I have been reunited with Berlin, Gershwin and Bernstein, etc.

API has done it again. Its press release accusing the EPA and the administration of playing politics with RFS guidelines concerning ethanol, a release published even before the EPA has released its amended proposals, is nothing short of clairvoyant. I knew API had strange powers and was funded by the oil industry that, itself, has often been accused of confusing magic with facts.

API’s most recent press release brought joy to my heart. Without recognizing that I was doing so, while trying to sleep, I started to remember, paraphrase and sing a memorable tune from a top-ten best song list, published in the early sixties, “What kind of fool am I” (Leslie Bricusse et al.) to hope for wisdom from API. It has often run counter to facts and analysis concerning the benefits and costs of alcohol fuels and instead reflected the organization’s support from its patron oil company, Medicis.

API now contends that EPA is about to increase the renewable fuel targets for ethanol. Wow, a revolution! Call out the National Guard! To API, EPA’s action, if it occurs, would defy market place experience. E15 and E85 is not selling well. Oh, E15 and assumedly E85 is harmful to car engines. EPA’s assumed new rules would result in wasted resources and skew the market away from their favorite American-made product, gasoline (over 30 percent of which is not made in the U.S., but is imported). Not only would America be ruined but Adam Smith would turn over in his grave. Previous API releases indicate, in rather shrill tones, that ethanol is harmful to marriages, causes cigarette smoking and sexual dysfunction (just kidding).

It’s hard to respond to API’s release (or releases). Yes, the market for E15 and E85 has been relatively slow to develop, but API’s funders — oil companies — have been a, if not the, key factor causing the gap between demand and expectations. Not only has the industry tried to kill the chicken, it has also tried to kill the egg. Let me count the ways (sorry, Elizabeth Barrett Browning):

1. Oil company franchise agreements rarely allow the franchise to locate an E85 pump in their stations. If they do, many times, it must be situated apart from the other pumps in the side of the station. At the present time, there are only 3,354 E85 stations in the nation. So much for the supply side.

2. Oil companies have not been fans of open fuel legislation. They have used their lobbyists and their own political power to help kill it every time it comes up in the Congress. So much for their collective belief in consumer choice.

3. Until recently, the carmakers in Detroit — historically, the allies of the oil industry — have been slow to respond to consumer and policymaker interest in flex-fuel cars — cars that can use more than gasoline and the conversion of existing cars to FFV status. While Detroit is now producing more flex-fuel vehicles every year, the oil industry still remains a backbencher and a naysayer with respect to producing or supporting alternative fuels and conversion options, new or old. So much for competition.

4. API’s research concerning the impact of ethanol on vehicle engines, funded, again, mostly by the oil industry, has not qualified it for applause and extended readership regarding methodology or content. Its relatively recent analysis of E15 was panned, justifiably, by the EPA and other researchers because of insufficient sample numbers and lack of relevant sample characteristics. But it apparently did what it was supposed to do: put fear in the minds of drivers concerning ethanol use. So much for independent and thorough research.

5. API seems to suggest that the RINS subsidy built in to the RFS is anti-market and anti-God and country. Maybe we should look at all subsidies granted fuels by the U.S. government and complete something like zero-based budgeting process to see which ones fit the public interest and which ones primarily line the pockets of the receivers. Government help, whether direct or indirect, whether visible or imputed, should be premised on articulated and transparent public objectives and should not substitute for private sector resources which would be available without subsidy. In this context, the range of oil subsidies, now on the books, clearly needs review and justification. They far outweigh the dollars that assist newer ethanol companies. Given resource constraints, perhaps we should put oil and ethanol support on a transparent evaluation table, and, after a fair debate, allow the public to decide. Et tu, oil companies and API!

API is an easy target. They shouldn’t be. With uncertainty concerning demand and price of oil and its derivative gasoline, I would think its bosses from the oil industry would put them to work reviewing the nation’s future menu of fuels and possible partnerships with alternative fuel companies and advocates. Apart from possible pro-forma benefits, many Americans who view the oil industry and its representatives through negative filters might begin to change their mind and see the industry as increasingly pro-choice, better on the environment, pro-consumer and pro-security. Hope springs eternal. The oil industry, up to now, has been living in a fool’s paradise for a long time — cheap oil, high demand and income growth. It’s the American way. But, given a changing economy, tight oil and relatively slow and uneven U.S. and global growth, continued reliance on an old oil industry monopolistic model will cause nightmares for wise men and women. API, what’s my next song? How about “I Can Dream Can’t I” or “High Hopes!”?

Innovation in oil & gas — it ain’t over yet

To read the newspapers these days, you’d think that all the innovation in energy is involved in bringing down the cost of solar panels or building even bigger blades for windmills. But innovation still continues apace in oil and gas, both in pulling them out of the ground and in finding new ways to use them.

“We haven’t been giving the big oil companies enough credit,” said Dominic Basulto in The Washington Post. “ Sure, we may see their print ads or watch as they tout their accomplishments on TV, but deep down, many of us believe that the brightest minds have moved on to something new in energy innovation. But that’s not true.”

That’s important because if we’re going to use our abundant natural gas supplies to wean ourselves off of foreign oil, we’re going to have to be sure the current superabundance of natural gas isn’t just a flash in the pan. Moreover, we’re going to need innovation in making the transition to methane-based liquid alcohol fuels easier as well.

As most people have heard by now, even our best technologies can’t extract more than about 10-20% out of an oil or gas reservoir from the earth. Simply doubling that rate would give us access to huge, new quantities of domestic fuels.

There’s also a concern that fracking wells will have a much shorter lifespan than traditional gas and oil wells. Then there’s all that natural gas being flared off in the Bakken. Ending that conspicuous form of waste will require some new technology.

All these problems are being tackled through innovation, however, and that’s what Basulto is talking about.

Although everybody knows about fracking — the technology of forcing sand and water into the rock to break it up — few realize that the real novelty that makes up the current upturn in production possible is horizontal drilling, which allows access to entire geological strata without making the territory look like a pincushion.

“Today, drilling rigs are so good that they can punch holes in the earth that are two miles deep, turn the drill bit 90 degrees, drill another two miles horizontally, and arrive within a few inches of the target,” said Robert Bryce, author of “Smaller, Faster, Lighter, Denser, Cheaper,” a book about innovation in the energy industry. But horizontal drilling hasn’t stood still. ExxonMobil has developed an “extended reach” technology that can push outward several miles further deep in the earth. “Extended reach reduces our environmental footprint and in offshore applications will limit our presence in the marine environment,” says the company’s website. It may have been developments like this that prompted President Obama to give a green light to exploration off the Atlantic Coast from Delaware to Florida last month.

The same innovations are occurring with natural gas fracking. Innovators have made an improvement called “sleeve technology” that surrounds the drill bit and allows highly accurate placement of stimulation treatments. The result is that wells can be drilled twice as fast as a few years ago, at a lower cost. With increased precision in both drilling and fracturing, wells are being made more productive as well. Erika Johnsen on Hot Air said, “Data from the Energy Information Administration’s Drilling and Production Report shows that a Marcellus Shale well completed by a rig in April 2014 can be expected to yield over 6 million cubic feet of natural gas per day (Mcf/d) more than a well completed by that rig in that formation in 2007.” That’s a huge improvement in the space of seven short years.

All this is good news for the effort of substituting natural gas-based ethanol or methanol for foreign oil in our cars. After all, one of the fundamental considerations is that there will be enough natural gas around to keep the price reasonable. With so many competing proposals for employing natural gas — electrical generation, the industrial revival, LNG exports, etc. — it’s crucial that we keep expanding production.

So it’s encouraging to hear the news from Clean Energy Fuels, T. Boone Pickens’ baby, which has been building a “CNG Highway” across the country to service long-haul tractor-trailers. CEF has just completed the first leg of this nationwide network, connecting Los Angeles and Houston.

But much of the nation still lies outside the reach of natural gas pipelines and CEF is figuring out a way to serve them, as well. Last month the company opened a filling station in Pembroke, New Hampshire that will be served by a “virtual pipeline” of high-tech tractor-trailers making round-the-clock deliveries. This will allow the station to pump 10 million gasoline-gallon-equivalents (GGE), twice the volume of CEF’s largest existing station. More important, it will open up large areas of the country that have not had access to CNG. This natural gas-based substitute will sell for 30% less than gasoline.

Technology never stands still. Sometimes it forces us to give up things that have become familiar or even seemingly permanent. But as Robert Bryce said, the new technology is usually “faster, smaller, lighter, denser and cheaper.” And in the case of methane-based liquid fuels, it will mean freeing ourselves from foreign oil as well.

When California had 15,000 methanol cars

Do you realize that California once had 15,000 cars on the road burning methanol? And that those drivers loved their performance? But that whole experiment came to an end ten years ago because – get this – natural gas was too scarce and expensive.

In an era when natural gas is cheap and plentiful – when people in the industry are warning that wells may soon be shutting down because there isn’t enough demand for the product – it may be worth going back and taking a second look at what happened in the Golden State from 1988 to 2004.

California, of course, has never been shy about pushing new technologies. At various times the state has pioneered renewable energy, mandated zero-emissions vehicles (electric cars) and tried to establish a “hydrogen highway” for fuel-cell vehicles. Not all these efforts have succeeded, and a few have been notable failures. But the methanol experiment, oddly enough, was fairly successful. Now, at a time when it could be seen as prescient, it is largely forgotten.

The project began way back in 1988, when memories of the 1970s energy crisis were still fresh, and various senators were looking for ways to plug their state economies. The impetus came from a joint effort by Sen. Jay Rockefeller of West Virginia and Sen. Tom Daschle of South Dakota. Rockefeller was looking for a way to promote his coal economy, while Daschle had his eye on farm wastes.

The ethanol-from-corn effort was already up and running, but both Rockefeller and Daschle recognized that methanol might work just as well, and that their home states could benefit. Methanol, after all, can be derived from coal, biomass or natural gas. The result was the Alternative Motor Fuel Act, signed into law by President Reagan in 1988, which provided a waiver of EPA regulations to allow methanol to be used in cars. A year later, President George H.W. Bush became an enthusiast, promising to put 500,000 methanol cars on the road by 1996 and a million by 1998.

Such presidential promises are often wildly exaggerated, but Ford Motor Co. took up the challenge and produced a Taurus model that could run on 85 percent mixes of both ethanol and methanol. This came at a time when gasoline had become cheap again, however, and there wasn’t much interest around the country in alternative fuels. But California took the initiative.

Mike Jackson, who was the lead technical advisor for the California Energy Commission and now works for Fuel Freedom, recalls the experience:

“The original justification was petroleum displacement in response to the 1973-74 crisis, but you learned fairly quickly that that wasn’t sustainable. But we realized there were air quality benefits, so we shifted in that direction.”

The state partnered with Ford and Volkswagen, agreeing to set up a string of fueling stations if they would bring out cars capable of running on methanol. Then the state started buying methanol vehicles for its various fleets. ”

“It was a technical success, but an emotional failure,” Jackson said. “The biggest problem was range anxiety. There were only 10 fueling stations at that time, and it just wasn’t enough. There were times when people abandoned the cars on the freeway because they were afraid they were going to run out of gas.”

Then Roberta Nichols, head of the research and development effort at Ford, came up with an idea: Ford would produce a flex-fuel vehicle (FFV) that could run interchangeably on a variety of fuels. The car could handle blends of 85 percent ethanol or methanol but could switch to gasoline if necessary. Ford produced a Taurus FFV, and the program once again went into high gear. The clean air benefits were adding up, and the state started to consider ratcheting down the NOx requirement to the point where the oil companies would have to add methanol or ethanol in order to meet them.

Suddenly, the oil companies stunned the state by announcing that they would be able to meet the standard by producing a new “blended” fuel.

“Everybody’s jaw dropped,” Jackson said. “Why hadn’t they mentioned this before? But they said they could achieve the same thing by adding MTBE, which is methanol-based, so that was it.”

The MTBE additive created a new problem for methanol. Since methanol was one of the feedstocks for the production of MTBE, supplies began to be diverted, and it became more expensive to use as a substitute fuel. However, MTBE eventually came under pressure because it was getting into drinking water. California and New York banned it in 2004, and most states quickly followed suit.

By that time, ethanol was going strong, with more and more of the corn crop diverted into its production, and the 10-percent ethanol blend became the substitute for oxygenating fuel and reducing NOx emissions.

“We ended up with cleaner gasoline technology,” Jackson said. “But we lost sight of the idea of methanol as an oil substitute.”

By this time, the country had fallen into the “Fuel of the Year” syndrome. Hydrogen had a big run in the late 1990s. Then, after the turn of the century, it was the electric car. Somehow methanol got lost in the shuffle. California’s program limped along until 2004, when the state finally abandoned it. With natural gas selling at $7 per mBTUs and peaking as high as $11, it didn’t seem to have any future.

Now, with natural gas supplies flowing in surplus, the California experiment suddenly seems far ahead of its time. Methanol made from natural gas at $3.25 per mBTU could sell at nearly half the price of gasoline made from $100-a-barrel oil. Methanol from coal could revive the flagging fortunes of the coal industry. Methanol reformed in the field could solve the problem of flaring in the Bakken Shale, which now wastes the equivalent of one-quarter of U.S. gas consumption every year.

Yet the methanol initiative is now largely forgotten. And of course, there’s always the problem that EPA regulations do not allow it to be used in automobiles. With natural-gas surpluses now at the point where a national oversupply is being predicted for 2017, however, it may be time to go back and give the California experience a second look.