Going Green: Canadian Fleet Investing in Natural Gas

What prompts a very successful and highly visible carrier to wade deeply into uncharted territory and invest millions in yet-to-be proven technology?

"It's the right thing to do and the right time to do it," says Claude Robert, president of privately held Groupe Robert in Boucherville, Quebec.

A good-sized company by American standards and the seventh largest motor carrier in Canada, Transport Robert intends to put 50 liquefied-natural-gas-powered trucks into service in the next 12 months, with plans to add at least 80 more by 2015. It will be the first genuine for-hire, long-haul natural-gas operation in North America, serving a 700-mile corridor between Windsor, Ontario, and Quebec City.

Currently, no LNG fueling infrastructure exists in the area. Robert is working with a Montreal-based LNG distributor, Gaz Metro, to build refueling sites at company terminals in Boucherville, Quebec, just east of Montreal, and Mississauga, Ontario, a western suburb of Toronto. Eventually, Robert sees at least six sites between Halifax, N.S. and Windsor.

"That would open the entire corridor from Atlantic Canada to the U.S. Midwest to LNG-powered trucks," he says. "If we could achieve harmonization across jurisdictions for investment tax credits, standards for refueling stations and procedures, and favorable fuel tax rates, we could reduce our reliance on diesel fuel a lot."

Carbon Credits

The distributor obviously needs volume to justify the infrastructure investment. Robert believes his 150 trucks will be enough to prime the pump. He's looking to government to respond appropriately from there, taking measures to spur investment in locally abundant natural gas as an alternative fuel. He's motivated not just by the green factor but also by lower operating costs and the accumulation and valuation of carbon credits on some future carbon trading market.

"We are going to generate a lot of carbon credits that we will either keep to offset future emissions, or sell on the open market," Robert says. "Either way, carbon credits are going to become an important factor in a fleet's profitability. Diesel engines are high carbon producers."

The net emissions advantage of natural gas over diesel is somewhat debatable today: NOx and PM output are said to be roughly the same with aftertreatment, but LNG offers a claimed 25 percent reduction in greenhouse gases. (Westport is rumored to be working on a natural gas engine that will not require exhaust gas reduction or a diesel particulate filter. That could turn the tide.)

Recently, the province of Quebec announced accelerated depreciation rates (from 40 to 60 percent) for new trucks purchased after March 31, 2010, and increased the rate to 85 percent for natural-gas-powered commercial vehicles. With incentives like that, uptake should be good.

Challenges

Running LNG trucks in a diesel world won't be easy, at first. Robert says he'll face a few challenges just learning how to maintain the equipment, and he'll have to make modifications to his garage facilities to provide adequate ventilation as a safety measure. And then there are environmental and safety crowds to please.

"It's funny," he says. "If gasoline or diesel were new fuels, we'd never be allowed to use them. The risk of contamination would be seen as too high. With LNG [that risk] tiny. It's a gas. It evaporates. Still, the permits are a lot of work."

Operationally, larger fuel tanks will increase the operating range of the trucks, but strategically located fueling sites will mitigate the problem too. He expects a 600-mile range from a fill, and the terminals are located about 350 miles apart. Trucks will be able to reach up to 300 miles west of Toronto and 300 miles east of Montreal. That gets him to the U.S. border at Detroit and to the Quebec/New Brunswick border in the East. Two fuel outlets cover that entire corridor.

The biggest problem with LNG is sitting in the truck. The fuel evaporates in the tanks as it warms, so they need to be kept running. A round the clock slip-seat operation is where these engines will shine, Robert figures - city work during the day, linehaul overnight.

The Equipment

Robert over-specs his trucks based on a 10-year lifecycle. The LNG trucks will be no different.

With the premium spec, he's looking at close to $225,000 per truck, which doesn't sound viable based on a traditional 4-5 year trade cycle. But Robert is betting cost of diesel will escalate over the long term.

"Fuel economy is comparable to diesel, and with fuel at $0.90 to $1.00 per litre (about $3.75 per gallon), we are in a break-even position. When diesel goes higher, the savings will only improve the return on investment."

At the same time, he's counting on continued - and spreading - provincial support for accelerated depreciation for LNG trucks and the fiscal advantages to carbon offsets.

"We have enough natural gas in this part of Canada to keep us going for at least the next 100 years. There's no question in my mind about its use as a truck fuel, and the environmental benefits are very compelling," he says. "I see no reason not to do this. The cost is justifiable and the ROI is there. And as soon as another supplier comes to market, hopefully with a 13-liter LNG engine, the cost will only improve."

From the October 2010 issue of Heavy Duty Trucking magazine.