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CNG Fueling Corridor

Written By Brianna Panzica

Posted January 18, 2013

Last year, Clean Energy Fuels Corp. (NASDAQ: CLNE) began the first major project for natural gas fueling infrastructure since the shale boom pushed natural gas prices through the floor.

Called America’s Natural Gas Highway, the effort to build 150 LNG fueling stations on major trucking highways across the United States got underway with 70 stations in 2012. The remaining 80 will be complete by the end of this year.

But this project was just part of a national focus on natural gas for fueling. Honda rolled out a natural gas version of its Civic last year, while a number of companies began shifting fleets over to natural gas vehicles.

But a major problem underlying a more universal shift was a lack of infrastructure on both sides. Without more vehicles (the Civic was the only natural gas passenger vehicle of 2012), fueling companies did not find it feasible to invest in filling stations. And without filling stations, auto makers didn’t foresee a demand for vehicles.

The change is slow but visible. Clean Energy’s project is made for trucks, appearing mainly at Pilot-Flying J Travel Centers. But truck fleets will likely be the first to shift to natural gas use, as companies will recover the cost of converting the vehicles by using the cheap fuel in place of diesel.

The next group to take the plunge, before passenger vehicles, will likely be government and business fleets. And it’s with that in mind – as well as the citizens that will benefit in the future – that IGS Energy CNG Services has agreed to develop a Compressed Natural Gas (CNG) Fueling Corridor in West Virginia.

The corridor will consist of three CNG filling stations along Interstate 79, costing a total of somewhere around $10 million.

The first station will be located in Charleston, with two more also starting construction in the first quarter. IGS Energy expects all three to be complete before the end of the year.

West Virginia’s Department of Highways will be the first to take advantage of the new stations. It has committed to purchasing 20 state vehicles capable of filling up at these CNG stations.

Companies such as Antero Resources, Chesapeake Energy Corp. (NYSE: CHK), and EQT Corp. (NYSE: EQT) have also agreed to make use of the stations with their fleets.

But the stations will also be open to the public, and anyone who owns a CNG vehicle will have the privilege of using the stations. And the development will also likely have the effect of boosting CNG vehicle purchases.

From the Charleston Daily Mail:

“West Virginia has been blessed with an abundance of natural gas, and I’m extremely appreciative of the many dedicated folks who are working hard to find the best way for our state to use it as a cost-saving means of transportation,” [Governor Earl Ray] Tomblin said.

The “abundance of natural gas” he refers to is gas from the Marcellus shale, on which West Virginia is located. And the fueling stations, IGS Energy’s West Virginia operations manager T.J. Meadows said, will use gas extracted from within the state.

CNG, on average, costs roughly $2.10 per gallon. The average price for gasoline in the U.S. this week was $3.30 per gallon, and diesel cost an average of $3.89 per gallon.

And while natural gas vehicles typically do cost more than standard gasoline- or diesel-powered vehicles, drivers in West Virginia can also take advantage of an Alternative Fuel Tax Credit. For converting passenger vehicles, this credit can be as high as $7,500. For industrial vehicles over 26,000 pounds, the credit can be $25,000.

Consumers can also purchase conversion kits to switch standard vehicles over to natural gas. These, Meadows told BusinessWeek, can cost between $2,000 and $10,000, but it will take under two years to recover the cost considering the difference in fueling price.

IGS doesn’t plan to stop its construction in West Virginia. The company is considering similar projects in Ohio, home to the Utica shale, and Pennsylvania, also on top of the Marcellus.

Not all passenger vehicles can be converted to natural gas, but enough can to make this Compressed Natural Gas Fueling Corridor a promising venture. And it’s ventures like these that will spark a shift in U.S. passenger vehicle fueling as the shale boom presses on.

That’s all for now,

Brianna Panzica

follow basic@brianna_panzica on Twitter

Energy & Capital’s modern energy guru, Brianna digs deep into the industry with accurate and insightful updates into the biggest energy companies and events. She stays up to date with the latest market moves and industry finds, bringing readers a unique view of current energy trends.

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