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The CNG revolution in Florida

In January, beer distributor J.J. Taylor of Tampa announced it would begin delivering beer to some of its Florida customers in trucks powered by compressed natural gas. The company has CNG fueling stations in Tampa and says it will build additional stations in Fort Myers.

“When diesel started going crazy in price, it just made economic sense for us to do this,” says Jose Rivera, corporate vice president of administration for J.J. Taylor. “We have estimated in Tampa it will take less than three years to get our investment back. The more miles and diesel you use, the faster it pays off.”

With CNG costing up to 40% less than diesel, more businesses, municipalities, school districts and waste haulers in the state are adopting the fuel, which is domestically produced and emits fewer greenhouse gases.

At Waste Management of Florida, spokeswoman Dawn McCormick says the garbage hauler has 148 trucks running compressed natural gas and will have 211 by the end of 2014. Waste Management has opened fueling stations in Pompano Beach, Venice and Fort Walton Beach and plans to open one this year in Tampa.

Alternative Fuel Vehicles

Number of permits issued in 2012 by the Florida Department of Revenue to owners or operators of vehicles powered by alternative fuel:

» Class A - 85 vehicles (cars and pickup trucks)

» Class B - 90 vehicles
(semi-trailers, school buses, motor homes, tow trucks, ambulances)

» Class C - 485 vehicles
(heavy trucks)

McCormick says along with the cost savings, there’s another incentive for Waste Management to convert to CNG: “Our customers (cities and counties) are asking or requiring it. They are writing it into their RFPs (requests for proposals). Eighty percent of the trucks we’re buying going forward will run on CNG.”

CNG’s popularity in Florida still lags far behind its use in California, however, which has aggressively promoted CNG with incentives and rebates that offset the cost of retrofitting existing vehicles and building CNG fueling stations. California’s rebate incentives for buying or leasing a vehicle range from $3,000 to $32,000 depending on the size of the vehicle. There are more than 254 public and private CNG refueling sites in California.

In May, the Florida Legislature passed a bill that will award grants to commercial fleets. Rebates will be as high as $25,000 per vehicle, up to $250,000 per year for trucks put into service on or after this past July. In addition, there will be no state sales tax on natural gas for five years.

Incentives aside, the chief obstacle to more widespread use of CNG in Florida is lack of infrastructure. The state has just 41 natural gas fueling stations, including private stations, according to the U.S. Department of Energy Alternative Fuel Data Center. Only 14 are open to the public.

The distance between stations is crucial since CNG-powered vehicles must be refueled after about 250 miles — a much smaller range than diesel-powered trucks. The lack of CNG refueling stations means, at least for now, that only those operators whose trucks return to base daily can make CNG work for them. A major city needs about three fueling stations to make CNG more appealing, says Scott Perry, vice president supply management for Ryder Fleet Management Solutions in Miami. “If there’s only one station, it may be oversold in six months.”

Ryder, which hasn’t launched a CNG program in Florida, has created private/public partnerships in Arizona, California, Michigan and Louisiana. In total, it has more than 300 compressed natural gas and liquefied natural gas trucks operating for customers such as Dean Foods, Golden Eagle Distributors and Staples.

Perry says fuel stations are more expensive to build in Florida than in some other states because CNG is generally transported via pipeline networks, which Florida lacks. “We don’t use alternative fuel for home heating, and our fueling infrastructure isn’t as diverse and available as in other parts of the country.”

Perry adds that more fueling stations will mean “more vehicles in the markets where the economics make sense. So far, we see benefits to our customers, but it’s not yet all things to all people. The variables need to be understood.”

Meanwhile, several municipalities in Florida are looking into ways to use CNG-fueled vehicles to cut costs and contribute to a cleaner environment. In Leon County, the school district has begun changing its fleet to buses that run on CNG and partnered with Miami’s Nopetro on a CNG fueling station.

As part of the agreement, the school district also gets royalties from private users who fuel up at the station. Leon County says the district will transition its entire fleet of buses to natural gas within five to 10 years, saving taxpayers millions of dollars.

“This is the first example of highly utilized and successful state-of-art fueling station in a public-private partnership,” says Jorge Herrera, co-founder and CEO of Nopetro. Herrera says his company is on the verge of more partnerships in Florida. “I think every transit agency and school district will aggressively transition their fleets to CNG. They have dedicated routes and are high volume gas users so the conversion is a no brainer for them.”

Natural Gas and Florida

» While Florida is the fourth-most-populous state, it ranks third in total energy consumption.

» Florida annually consumes more than 728 billion cubic feet of natural gas.

» 85% of Florida’s existing natural gas use is in the electric utility sector.

» 59 of Florida’s 67 counties have natural gas services available for industrial, commercial and residential use.

Source: Florida Natural Gas Association

In January, the north Florida independent regional transportation planning agency for Duval, Clay, Nassau and St. Johns counties launched a CNG conversion initiative. It will spend about $750,000 to upgrade new municipal fleet vehicles such as buses and trucks to run on CNG, and it is pursuing partnerships with fuel providers to build CNG fueling stations. Its plans are to use the initial cost savings from alternative fuel to buy more alternative fuel vehicles. In the Panhandle, Pensacola Energy has been forming partnerships that are transitioning government vehicles to CNG.

In June, Miami-Dade County Mayor Carlos Gimenez announced that the county has drafted a proposal to replace its municipal fleet with CNG vehicles.

Jeff Greene has been at the forefront of introducing and promoting CNG use in Florida. He heads business development at Fort Lauderdale-based Wise Gas, operator of the first CNG fueling stations in south Florida. Today, Wise Gas operates Broward County stations that handle about 150 transactions a week — selling the equivalent of about 8,000 gallons of gas a month. It also built a station in Clearwater that fuels fleet vehicles for Verizon and the city of Clearwater and designed and built two private stations for city vehicles in Apopka and Palatka. Greene says his company is working on partnerships to build a half-dozen other stations around the state in cities such as Fort Myers, Sebring, Orlando, Jacksonville and Miami.

“CNG infiltration into Florida is a puzzle with 100 pieces,” Greene says. “You have to have customers, property, the right pressure of gas, a reasonable regulatory body, governments that want it, a utility that has to sign off on it and a revenue stream it deems appropriate.”

Jeffrey D. Korzenik, chief investment strategist at Fifth Third Bank who follows the natural gas sector, feels the trend toward natural gas will be similar to the nation’s previous transition to diesel. “Today, no one has hesitation to drive a diesel vehicle. I think the same thing will happen with CNG.”