Investing In the Natural Gas Highway and Related Transportation
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The future of long-haul transit and commerce may be in liquid natural gas (LNG). Depending on which state and market, liquid natural gas as a fuel source can be as much as $1.50 a gallon cheaper than traditional gasoline or diesel fuel. It also reduces greenhouse gas emissions significantly (23%-30%) when compared to these other, more traditional fuel sources. LNG also has the potential capability of leading America to energy independence, because according to the US Department of Energy, 98% of the natural gas consumed in the nation comes from North America.
The Natural Gas Highway
The largest provider of natural gas fuel for transportation in North America, Clean Energy Fuels (NASDAQ: CLNE), in a collaborative effort with General Electric (NYSE: GE), is working to build LNG transport infrastructure in America. The company recently completed the first stage of its planned "Natural Gas Highway" and plans to have up to 70 fueling stations nationwide by the end of this year:
Clean Energy Fuels also plans to have an iPhone app by the end of the year that will work in conjunction with its web based station locater. Clean Energy Fuels is the company that is in the lead by far for the building up of LNG infrastructure, and is thus helping to instate LNG as a realistic fuel source. The company is building up the natural gas highway at a good time, as the arrival of new natural gas truck engines are starting to be introduced.
Many of Clean Energy Fuels' natural gas filling stations were built near existing Pilot-Flying J truck stops. Why is this significant? Because Pilot is the nation's largest truck-stop operator. Carrying into next year, Clean Energy also plans to continue building (roughly 70 to 80) additional LNG fuel stations in close proximity to long-haul trucking routes, as well as major warehouse distribution centers. If LNG fuel takes off as predicted, it will be convenient for truckers to fill up at stations built by Clean Energy Fuels. According to the head of the American Trucking Associations, Bill Graves:
"There's going to be a deployment of fueling stations all across the nation and it's going to make movement of freight by truck -- by natural gas powered truck -- a reality."
The Natural Gas Engine and Trucking:
In a joint venture, Cummins (NYSE: CMI) and Westport (NASDAQ: WPRT) have taken the lead in providing a natural gas engine suitable for long-haul trucks. The companies have already provided thousands of 8.9-liter ISL G engines for the trucking industry. The companies now plan to introduce the highly anticipated Cummins Westport 11.9 liter ISX12 G natural gas engine in 2013. This is significant, because the majority of long-haul trucks utilize an 11.9 Liter engine.
According to CNN Money, industry officials have said that the 11.9 natural gas engine is a game-changer because it occupies the "sweet spot" in the market for long-haul trucking engines. Companies planning to adopt the Cummins Westport 11.9 liter ISX12 G natural gas engine are numerous, and include trucking stall-worths such as Kenworth and Peterbilt. Lagging behind Cummins, Caterpillar (NYSE: CAT) also has plans with Westport to introduce long-haul natural gas engines within the next five years.
The Bottom Line
Trucking companies will realize huge savings in fuel costs, as well as lower greenhouse gas emissions, by converting to LNG engines. Cummins, in conjunction with Westport, is helping to make the conversion process easier by providing a standard 11.9 liter engine suitable for long-haul trucks. Difficulty of conversion doesn't seem to be the constraint on LNG adoption as an alternative fuel source- the problem is lack of infrastructure.
This is where Clean Energy Fuels and their Natural Gas Highway come into play. The Natural Gas Highway is providing fueling stations alongside traditional fueling stations and making LNG transportation and long-haul trucking a reality quicker than many think. Famous investor T. Boone Pickens is an investor in Clean Energy Fuels, and addressed the concern of "lack of infrastructure" that many seem to think is crippling LNG as a fuel source, stating:
"If somebody said, 'Henry (Ford), have you thought about it? You don't have any filling stations!' He'd say "Gosh, I haven't thought about that. Well I'll forget this idea. That's not what he said. He said, 'Don't worry about it. You will get filling stations. If the car shows up, filling stations will come.'"
Natural gas powered vehicles are getting their filling stations, and Clean Energy Fuels is on the front lines, building up America's natural gas infrastructure. Investors looking to invest in America's Natural Gas Highway, as well as domestic natural gas transportation in general, should keep an eye on Clean Energy Fuels. Cummins and Westport are also companies to consider for natural gas transportation exposure. There are many ways to play the upcoming potential boom in natural gas, and companies correlated with LNG-powered transportation, or the building of LNG infrastructure, are a good way to get exposure to the gas.
Jharry1 owns shares of General Electric Company. The Motley Fool owns shares of Clean Energy Fuels, Cummins, General Electric Company, and Westport Innovations. Motley Fool newsletter services recommend Clean Energy Fuels, Cummins, and Westport Innovations. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!