One of these days, the semitrailer truck hauling grapefruit to an Omaha grocer could be powered with natural gas from the Metropolitan Utilities District.
When that happens, local consumers could save two ways: cheaper grapefruit and less bite in their MUD bills.
That's because MUD on Wednesday agreed to become the sole liquefied natural gas supplier for fueling stations that stretch for 200 miles around Omaha, part of a cross-country network backed by Texas oil and gas tycoon T. Boone Pickens.
His goal: to shift a significant share of the nation's trucking fleet to vehicles powered by natural gas instead of diesel fuel.
Pickens' company, Clean Energy Fuels Corp., has committed to completing most of its fueling network by the end of 2013, when 150 fueling stations should be in operation coast-to-coast.
Clean Energy estimates that truckers could save $1.50 or more per gallon on liquefied natural gas over diesel. If that holds, a trucker could recoup in less than two years the additional $30,000 cost of semis that run on natural gas, according to Clean Energy.
“Nationwide, in five years, we hope to displace 10 to 12 percent of current diesel fuel usage on the road — that would be 2 to 3 billion gallons of diesel,” said Koby Knight, assistant vice president for Clean Energy.
The trucking industry is already testing natural gas-fueled semis, said Derek Leathers, president and chief operating officer at Werner Enterprises.
But the technology isn’t yet mature enough to make it economically feasible for high-mile, heavy-duty hauling. The engines don’t yet deliver enough power, and the trucks need more range. That is likely to change, he said. It’s just a question of how long it takes.
“We are believers that this technology will gain traction over time,” he said. “We remain committed to further testing going forward.”
By joining Pickens' company, MUD officials hope that the utility can take in enough new revenue to slow or reverse an astonishing increase in the base rate of MUD bills. The base rate is that part of the bill customers pay regardless of how much gas or water they use.
“This is critical,” said Doug Clark, president of MUD. “It will increase our efficiency. It will stabilize our rates, and if the market takes off, it will do more than that.”
Liquefied natural gas is similar to the natural gas used to heat homes, except that it has been supercooled to the temperature at which the gas turns to liquid, 260 degrees below zero.
MUD is the first utility to sign a long-term agreement with Clean Energy for liquefied natural gas, Knight said. Other agreements will follow soon, he said.
The 15-year contract commits Clean Energy to pay up to $2 million for improvements necessary to transfer liquefied natural gas from MUD's tank at 117th and Fort Streets into tanker-trucks. Delivery of the fuel to truck stops would begin next year.
For its part, MUD has agreed that Clean Energy will have exclusive rights to buy and sell its liquefied natural gas as a transportation fuel within the 200 miles of Omaha.
Both Clark and Knight said the terms of the contract stipulate that homes and businesses that rely on MUD natural gas continue to have first priority.
“This will not jeopardize natural gas to the city or even jeopardize our ability to back up our system,” Clark said.
Instead, what the deal does, said board Chairman Mike McGowan, is create a yearlong revenue stream for MUD's natural gas system, which until now depended heavily on cold-weather-driven winter revenues.
“This has huge potential as a new source of annual revenue,” he said. “It could go a long way (toward) mitigating MUD's costs and mitigating the need for any future rate increase.”
That's no small feat for area residents and businesses.
MUD has been shifting more of its fixed costs to the baseline of its bill. Declining use of natural gas necessitated the change because MUD still had to pay for its infrastructure. Use has declined as a result of the economic downturn, increased energy-efficiency of homes and businesses and warm winters. Ten years ago, a MUD bill's monthly fixed fees totaled about $10; now they're $31.77.
And that doesn't tell the whole story, because the City of Omaha also levies its sewer fees on MUD bills. Those have climbed from $5.90 in 2002 to $15.25 this year, with the worst yet to come.
Forecast increases from the city and MUD could, within five years, push the base portion of MUD bills to $80 or more.
That, MUD board members and staff said, is why they are excited about this venture.
Each Clean Energy tanker-truck of fuel that leaves MUD's plant would chip away at a portion of MUD's fixed costs, Clark and his board members said.
“We're exporting our costs,” McGowan said.
The new demand could do more than return MUD to the days when Omaha saw rapid construction of new homes.
Knight said his company would initially fill a tanker truck every few days but could eventually fill 10 to 30 tankers daily.
Sales of that volume would be the equivalent of MUD serving 30,000 to 90,000 additional homes, said Mark Doyle, senior vice president for MUD.
And natural gas, while still a fossil fuel, burns cleaner than diesel fuel. Though domestic drilling for natural gas carries its own environmental costs, Knight and Clark expect it to be a reliable fuel into the future.
“This is a lasting fuel. The U.S. has well over 100 years of supply of natural gas,” Knight said. “We have more natural gas than Saudi Arabia has oil.”
Clark said MUD is a logical choice as a regional supplier because it sits at the junction of Interstate 80, one of the nation's major trucking routes, and Interstate 29. Additionally, it has a 12 million-gallon liquefied natural gas tank on its property, something many utilities don't.
“We're critical,” Clark said. “Between Chicago and Denver, there's nothing but us.”
Many of the 150 fuel pumps Clean Energy hopes to install nationwide by the end of 2013 will be at Pilot-Flying J truck stops.
By that time, stations in Gretna, North Platte, Kansas City and Des Moines will be fueled with natural gas from MUD.
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