Truckers chafe at alternative fuel mandates

If market potential were a yardstick for commercial success, then alternative fuels like biodiesel and natural gas would be a sure-fire winner. After all, who could argue with energy sources that can be indigenously made from readily available materials, and, depending on the fuel, could be less expensive than the traditional diesel fuel that powers the nation's heavy-duty trucks?

Well, for one, the trucking industry might raise an objection.

Hard-bitten truckers who don't have enough of a profit cushion to deal in abstractions say that alternative fuels, for all of their prospective benefits, do not now—and may never—give the industry the same bang for the buck that traditional petroleum-based diesel fuel provides.

Richard Moskowitz, vice president and regulatory affairs counsel for the American Trucking Associations (ATA), says, "They are called 'alternatives' for a reason. If these fuels performed better than petroleum-based ultra-low-sulfur diesel fuel, then most likely the industry would have embraced them voluntarily."

So far, truckers' pleas that fuel-usage decisions be left up to the fleets themselves and not to government edict have fallen on deaf ears.

The industry currently faces government mandates that will force it to use more alternative fuels. By law, truckers must increase their consumption of biodiesel to at least 1.15 billion gallons in total for the years 2009 and 2010 combined. The amount will rise to 1 billion gallons annually by 2012. In 2009, only 350 million gallons of biodiesel were consumed, according to data from the ATA, which represents several large private fleets along with its core membership of for-hire carriers. All told, the trucking industry consumed 34 billion gallons of fuel in 2009, the ATA said; in recent years, the total annual consumption has gone as high as 39 billion gallons.

The ATA says it supports a voluntary adoption of a blend of 95 percent petroleum-based diesel and 5 percent biodiesel. Any ratio that calls for higher biodiesel content would be too costly for truckers, due to the high cost of soybean oil that is the primary feedstock, Moskowitz says.

Biodiesel has some drawbacks, truckers say. It causes performance problems in cold weather, and its 9 percent lower energy content compared with diesel means a truck must consume more biodiesel than it would traditional diesel to generate the equivalent amount of energy, the ATA argues. For example, a trucker would have to burn 11 gallons of biodiesel to generate the same energy as 10 gallons of petroleum-based diesel.

Ironically, biodiesel prices have been steadily rising in recent years, mirroring the increase in soybean prices caused, in part, by agribusiness's diverting more soybeans to fuel production and away from traditional uses (which generate a lower return). Currently, biodiesel prices are more than $1 a gallon higher than comparable diesel prices.

Congress has subsidized biodiesel production through a $1-a-gallon tax credit, but it doesn't fully offset the higher biodiesel cost relative to petroleum-based diesel, according to Moskowitz. The credit expired on Dec. 31, and while the House has passed an extension, the Senate, at this writing, had yet to act. Although the Senate is eventually expected to follow the House's lead, until it does, the biodiesel industry has "effectively been shut down," says Moskowitz.

Cost barriers
An August 2009 member survey by the National Private Truck Council (NPTC) underscores the schism between the desire to make operations more environmentally friendly and the willingness to make the use of alternative fuels a part of the plan.

The survey found that 70 percent of the respondents were involved in some type of "green" initiative. However, the respondents were decidedly ambivalent when asked about biodiesel use, according to the comments made available to DC Velocity by the NPTC. One biodiesel user switched back to petroleum-based diesel after the rise of soybean oil prices pushed the cost of biodiesel out of range. Another respondent says the up-front cost of buying a vehicle capable of running on alternative fuels outweighed any potential benefits of using the fuels. NPTC declined to release a copy of the survey results, saying it was proprietary to its membership.

Truck costs are a particular concern when weighing the pros and cons of natural gas, another alternative fuel. Natural gas supplies are considered plentiful and are largely indigenous to North America. However, the cost of a truck capable of being powered by either liquefied or compressed natural gas is between $40,000 and $75,000 higher than a comparable truck burning petroleum-based diesel fuel, according to the ATA.

Natural gas usage by heavy-duty trucks is also constrained by a relatively primitive refueling infrastructure compared to the diesel network. The absence of an established refueling network would be less of an issue for private fleets that have defined routes and would return to the same depot the trucks left from. However, it poses a problem for those heavy-duty truckers that operate over so-called irregular routes and don't know where they are going to be—or where they will need to refuel—on any given day.

Ray of light
Yet there are glimmers of progress. One streak of light is emanating out of Fremont, Calif., where a four-year-old company called Oorja Protonics has developed fuel-cell technology to convert the chemical methanol into an energy source capable of powering heavy-duty rigs. Methanol can be produced from, among other sources, wood alcohol found in dead trees, natural gas found in landfills, and a grass known as switch grass.

Sanjiv Malhotra, Oorja's founder and CEO, says the technology is being used to power forklift fleets in customers' distribution centers. But the technology also has potential applications for private over-the-road fleets. It is now being beta-tested as a power source for the auxiliary power units (APUs) used to provide climate control and electrical power for truck cabs when the engine is turned off, eliminating the need for costly vehicle idling. Malhotra estimates that vehicle idling costs the trucking industry about $9 billion a year.

Malhotra says methanol is found in abundance throughout the United States, and because it is a chemical commodity, its price doesn't fluctuate significantly. He says methanol's costs generally stay in a range of $1 to $1.50 a gallon.

The front-end costs to buy and install the fuel-cell packs can run as high as $10,000 per vehicle. However, should the technology gain critical mass, Malhotra says, the costs should be cut almost in half. Even at today's prices, users of the technology can "recoup their initial investment in less than 12 months," he says.

In the eyes of the trucking industry, the Oorja example is the future of the interaction between truckers and alternative fuels, where consumption decisions are driven not by government fiat but by private-sector innovation and fleet-planning initiatives.

But Moskowitz of ATA sees a different future. "The penetration of alternative fuels in our industry will be driven largely by government action, either through tax credits or through mandates," he says.