Is US overlooking fuel alternative?

As prices soar, the nation largely ignores the natural-gas option

Email|Print|Single Page| Text size + By Clifford Atiyeh
Globe Correspondent / May 23, 2008

Europeans can buy cars that run on natural gas from at least eight automakers, but despite large reserves of the relatively inexpensive fuel in the United States, the federal government and states, including Massachusetts, are backing pricier biofuels as a way to lessen dependence on imported oil.

In the United States, use of natural-gas-powered vehicles is limited mostly to commercial and municipal fleets, including 360 MBTA buses, but such vehicles are making a significant dent in the European consumer auto market as oil trades above $130 a barrel. The fuel, compressed at high pressures and called CNG, burns cleaner and produces fewer greenhouse gas emissions than other petroleum fuels.

As gasoline prices in Massachusetts near $4 a gallon and diesel is already above that level, the equivalent of a gallon of natural gas averages about $2.69. A gallon of pure biodiesel, primarily made from soybeans, sells for an average of nearly $5 nationwide, according to a recent report from the Energy Management Institute. Another alternative fuel, E85 - which is ethanol mixed with gasoline - averages just under $4.20 for the equivalent of a gallon of gasoline.

The United States has the sixth-largest natural gas reserves in the world. It imports 16 percent of its natural gas - mostly from Canada - and 58 percent of its petroleum, according to the Energy Information Administration, which calculates imports after subtracting exports. Philip Giudice, commissioner for the Massachusetts Division of Energy Resources, said the United States once viewed natural gas as a "big possible alternative" to gasoline, but that it "hasn't worked on a broad scale."

"I think that moving money away from natural gas and into ethanol, which is where a lot of money got moved from the federal government, had a significant effect," Giudice said.

In a speech this month, Governor Deval Patrick touted cellulosic biofuels, which include more efficient blends of ethanol and biodiesel. A state report in April said Massachusetts could replace 6 percent of its gasoline consumption by producing such fuels. Part of the energy bill President Bush signed into law last December requires increasing annual biofuel consumption from 9 billion gallons to 36 billion gallons by 2022.

Even some current users of natural-gas-powered vehicles, like the Massachusetts Bay Transportation Authority, are rethinking their strategy. In the MBTA's case, it is because of advances in diesel-electric hybrids, not biofuels. When natural-gas-powered buses were introduced in December 2003, customers applauded their lack of smoke, said Richard Leary, the MBTA's chief operating officer. But manufacturers have greatly reduced diesel emissions in recent years, making diesel-electric hybrids an attractive and cleaner option, Leary said. As a result, the MBTA does not plan to buy more natural-gas-powered buses, he said.

Dennis Smith, director of the US Department of Energy's Clean Cities program, said state incentives have been "very instrumental" in popularizing natural-gas-powered cars, but only in a few areas.

"It really only makes sense if you're going to use a whole lot of fuel," Smith said. "But as far as putting a natural gas station that's a 7-Eleven on the corner, there's probably only a few markets where that pans out."

Massachusetts has just 11 stations out of almost 800 nationwide, which are mostly in the West, according to the Department of Energy. Many are only open to federal and state government fleets, which are required by law to use certain amounts of alternative fuels, and they cost significantly more to build than similarly sized gasoline stations. By contrast, Germany alone has nearly 800 natural gas stations.

Such availability has helped the market in Europe for cars that run on natural gas. There are roughly 800,000 natural-gas-powered vehicles - about 12 percent of the world's total and at least five times the number in the United States. Half are in Italy, where a large market has developed since the 1930s, said Jeffrey Seisler of Clean Fuels Consulting, a Brussels-based natural gas lobby. Germany taxes natural gas at about two-fifths the rate of gasoline and the price is about 50 percent lower than premium unleaded, which is now more than $8 a gallon.

Automakers in Europe have also been aggressively pushing natural-gas-powered cars. In March, Volkswagen AG unveiled a natural gas Passat in Geneva, and next month Daimler AG plans to launch a version of its subcompact Mercedes-Benz B-Class that runs on natural gas and gasoline. Since 2001, Opel, the German arm of General Motors Corp., has sold more than 42,000 natural-gas-powered models in Europe. Gherardo Corsini, an environmental director for GM Europe, said the company was "very surprised" when more than two-thirds of sales for its natural gas Zafira minivan went to regular buyers. But that does not mean natural gas will soon rival diesel, which commands nearly half the German market. Last year, for example, Ford Motor Co. sold about 350 natural-gas-powered vehicles in Germany, a sliver of its total 1.8 million sales across Europe.

"CNG is still a niche in Europe," said Adrian Schmitz, a spokesman for Ford of Europe, "but it's a very, very important niche and could easily increase if the infrastructure of gas stations would increase."

In the United States, the Honda Civic GX is the only natural-gas-powered car offered by a major automaker. The company restricts private sales to California and New York - the states with the most fueling stations. Honda said it sold 459 natural-gas-powered Civics in those states last year.

Detroit automakers said they stopped selling natural-gas-powered cars in the United States due to high production costs and a lack of fueling stations. One after the other, the cars were history: Chrysler in 2003, Ford in 2004, and GM a year later. But the natural gas industry, which has not focused on retail car sales, blames unfair government policies for relegating the fuel to the back burner.

"The president gets up there and says, 'It's going to be ethanol, it's going to be hydrogen.' Well, when's the last time you heard him say it's going to be natural gas?" said Richard Kolodziej, who runs the natural-gas lobby NGVAmerica. "We don't get that kind of visibility."

Seisler said "people are suffering" because the government's reluctance to let alternative fuels compete in a balanced market forces them to rely on expensive gasoline.

If there were more options, he said, "people wouldn't be trapped with having to purchase petroleum-based vehicles."

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