Over the past few months, EnCana Corp. (ECA-T33.410.190.57%) has been in talks with government officials about a plan to build a network of hundreds of compressed and liquid natural gas fuelling stations between Windsor, Ont. and Quebec City, Canada's busiest highway corridor.
EnCana, one of the continent's biggest suppliers of natural gas, is also pushing Ottawa to create tax incentives for trucking companies that convert their 18-wheelers from diesel to natural gas engines. The company has been working together with Westport Innovations Inc., a maker of natural-gas-powered truck engines, and the Canadian Natural Gas Vehicle Alliance to convince the Conservative government to include the spending item in its spring budget.
Asked about the proposal, a spokesperson for Natural Resources Canada said its “interest and assessment in all alternative and renewable transportation fuels is ongoing.”
Though trucking companies and even Enbridge Inc., the country's largest natural gas distributor, remain skeptical of the new fuel source, EnCana has also supported a U.S. industry group that has held meetings with Detroit auto makers, in hopes of convincing them to make natural gas-powered pickup trucks, which could be used as corporate fleet vehicles.
It all amounts to a remarkable advocacy role for a company eager to stoke a bigger market for its prime commodity, and reflects the new reality that natural gas producers face, as new gas sources shake up the industry.
“It is a big step,” said Eric Marsh, EnCana's executive vice-president of natural gas economy.
“We've moved into a new time period where natural gas is going to be abundant and affordable, and we need to explore these ideas to use natural gas a lot more than we have in the past … So we're going to push forward with trying to help others find natural gas to be an acceptable fuel for the future.”
The past several years have brought a stunning change in the supply of natural gas, which was first considered in short supply, before technological advances made more gas accessible. North America is sitting on a century’s worth of gas, based on current consumption.
EnCana has married that “abundance story” with the fact that natural gas-powered vehicles produce about a third less greenhouse gas emissions, and far fewer smog-producing particulates, than other engines. It hopes government spending will help solve the chicken-and-egg dilemma that all new transportation fuels must overcome: Who will buy the natural gas vehicles if there is no place to fuel them?
Though the company has identified several important corridors for such installations – it has begun talks with the B.C. and Alberta governments about building filling stations between Edmonton and Vancouver – the 1,150-kilometre stretch of Highway 401 from the U.S. border to Quebec carries a hefty chunk of the country’s traffic.
Natural gas engines typically provide similar performance to their gasoline and diesel equivalents, but create a smaller carbon footprint and promise cheaper operating costs, since natural gas often sells for half the price of other fuels. As a result, they have begun to gain traction in urban transit and garbage fleets, and have been adopted for some specialized applications, like port drayage.
But lack of familiarity, a dearth of infrastructure and, until recently, worries that natural gas was running out, have kept it from gaining adoption.
“Virtually no vehicles are running on the technology,” Mr. Marsh said.
EnCana and its partners are pushing Canada to adopt a tax credit similar to one offered in the U.S., where all 50 states offer up to a $32,000 (U.S.) credit to truckers who switch from diesel. They say natural gas is so cheap – and, thanks to its current abundance, will likely stay that way – that the higher purchase cost for a natural gas truck can pay itself back in 11/2 years. Fuel savings can cut operating costs by 25 to 30 per cent every year after that, they say.
Truckers, however, remain unconvinced. Although EnCana estimates that 40 per cent of trucks return to base every night, making them good candidates for natural gas refuelling, a single highway corridor would do little for the many long-haul trucks that cover the continent.
“It’s like anything else that’s brand new. It’s kind of like when the first TV comes out – you’re suspicious,” said Ron Foxcroft, chief executive officer of Fluke Transportation Group, which runs 175 trucks within a 500-kilometre radius of Hamilton.
“And now, since the recession, we can’t afford to gamble on anything.”
Enbridge, whose 812-vehicle natural gas fleet is the biggest in Canada, has begun looking into whether it can provide some of the compression equipment and other infrastructure needed to make a natural gas highway a reality. Yet it remains cautious.
Natural gas-based fuels have “some reasonable potential,” Enbridge chief executive officer Pat Daniel said in an interview. “The biggest challenge will be the investments required by truckers in order to be able to convert to natural gas, and the economics of that don’t look overwhelming.”
The biggest question, he said, is whether the government will provide incentives to truckers to switch. Truckers want measures like super-accelerated capital cost allowances to make the change – and those incentives are needed even if the math makes a natural gas engine look like a better deal, said Jonathan Burke, a vice-president at Westport, a Vancouver technology company that has teamed up with engine maker Cummins.
“This is a highly competitive, deregulated industry and there is a risk in being the first adopter who switches his fleet,” he said. “What you’re looking for is something to defer a certain amount of that risk
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