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Natural gas-powered trucks gaining popularity with over-the-road freight haulers

When you take the family out for the summer road trip, that 18-wheeler you are about to pass might be a Kenworth T680 road tractor with a concealed bank of compressed natural gas (CNG) tanks and a Cummins Westport natural gas engine.

After nine decades of truck manufacturing, Kenworth Truck Company, a division of PACCAR Inc (ticker: PCAR) of Bellevue, Washington, keeps alert to technology changes affecting its customers. And a switch in fuel preference to natural gas from traditional diesel fuel has been gaining momentum with fleet owners.

In 2011, Kenworth’s Wisconsin dealers hosted a NatGas Summit for customers in which engine technology and fueling infrastructure were discussed for compressed natural gas and liquefied natural gas (LNG).

“The summit was a response to our customers’ requests to learn more about natural gas, the natural-gas powered trucks [that] Kenworth makes and about the experiences of customers who have already started using the trucks,” said Jim Moeller, president of CSM Companies, parent company of Wisconsin Kenworth. “It’s becoming increasingly clear to us and to our customers that the key to the future of our country’s energy independence will rely on more domestically produced natural gas well into the first half of the 21st Century.”

Kenworth’s customers responded with orders, and the truck manufacturer expects its natural gas segment to grow by up to 20% by 2020, according to an article in Today’s Trucking.

Green Bay, Wis.-based regional truckload carrier Paper Transport Inc. was among the first to begin moving toward a fleet with a significant number of natural gas-powered trucks. Paper Transport tested two Kenworth natural gas trucks in 2012, and in 2013 the company added 20 CNG-powered Kenworth T660s with the Cummins Westport ISX12 G engine.

“It’s been a learning curve, but we’re no longer testing. We’re well on our way to adopting natural gas, which we think will provide us a significant competitive advantage,” said Jeff Shefchik, President of Paper Transport.

Paper Transport hauls corrugated cardboard, paper wrapping, paper rolls, toilet paper and other paper products for a major paper producer in the state of Wisconsin to warehouses and distribution centers throughout the Midwest and southeastern United States. Paper Transport also hauls building products, furniture and products for a major beverage company throughout the Midwest and Southeast. “Our customers appreciate getting deliveries from trucks with quieter engines that emit fewer greenhouse gases—trucks that are easier on the environment,” Shefchik said.

Paper Transport specified Agility Fuel Systems™ tanks in its original orders to Kenworth. One tank was75 diesel gallon equivalent (DGE) of CNG capacity mounted to the back of the cab, and the second a 40 DGE tank mounted to the driver side. Paper Transport’s new trucks held the bigger 400-hp Cummins Westport ISX12 G engine and tanks offering 100 DGE of CNG capacity for the back-of-cab and 40 DGE of CNG capacity for the side-mounted tank. The expanded fuel capacity gives the trucks a 600-mile range on a single fueling. “Our drivers … have really seen no difference in the response and the power and torque offered by the ISX12 G with natural gas, compared to comparable diesel-powered engines,” Shefchik said.

The Cummins Westport ISX12 G engine requires a single fuel source and can run on either CNG or LNG, both of which are cost-effective, low-carbon and low-emission fuels.

“The combination of 1,450 lb-ft of torque, simplified emissions and a 40% to 50% reduction in fuel price are key motivators for customers like Paper Transport to consider natural gas,” said Andy Douglas, Kenworth National Sales Manager for specialty markets. “Price stability has also been key.”

Shefchik said that since natural gas is domestically produced, it offers greater price stability than what the company gets with diesel –the main reason natural gas has such great appeal for his company.

“Since Paper Transport has been paying an average of $1.70 less per diesel gallon equivalent of natural gas than what it pays for diesel fuel, the company will be able to recoup the additional cost of the technology through fuel cost savings,” Shefchik said. “Because of global instability, the price of diesel fuel has been all over the place. We believe natural gas is here to stay, particularly given all of the natural gas production happening in the United States.”

Paper Transport joins a growing list of trucking companies outfitting its fleet for LNG and CNG capability. In October 2013, the United Parcel Service (UPS) spent $68 million on trucks and infrastructure, with the trucks also coming from Kenworth.

Freightliner Trucks, a division of Daimler Trucks North America LLC, of Portland, Oregon, another legacy heavy duty truck manufacturer, posts an interactive CNG station map and fuel savings calculator on its website. The United States Department of Energy reports 719 registered CNG stations are located throughout the US as of June 2014.

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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.