UPS’ purchase of 700 LNG Tractors a bellwether event

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UPS plans to purchase 700 or more new tractors fueled by liquefied natural gas. UPS has not yet announced who will manufacture the new tractors. However according to Kristen Petrella, Public Relations Manager for Sustainability at UPS, the company is evaluating two engine options – Westport Technologies’ 15L HPDI engine and Cummins-Westport’s new ISX12G engine. Production of the latter is ramping up with the engines expected to be in full production by September of this year. According to UPS, the new LNG cabs will be delivered through 2014.

Over 1,000 of the package delivery and logistic company’s current fleet vehicles are fueled by natural gas. The UPS fleet now includes 112 tractors fueled by LNG operating in the company’s Las Vegas, Phoenix, Salt Lake City, and Southern California service areas. UPS also operates more than 900 trucks fueled by compressed natural gas. The UPS LNG trucks operating out of Las Vegas and Phoenix fuel at Clean Energy Fuels Corp. stations while the trucks operating out of Salt Lake City fuel at a station operated by Blu LNG, a division of Transfuels LLC.

Alongside the new LNG truck purchases, UPS will construct four new LNG fueling stations, one each in Knoxville, Nashville, Memphis, and in Dallas. UPS has entered into a 10-year agreement with Pivotal LNG, a subsidiary of AGL Resources. Under the agreement, Pivotal will supply up to 500,000 gallons of LNG per month to UPS at the Nashville and Knoxville stations from Pivotal’s available network of LNG liquefaction plants. Information on who will provide LNG supply at the Memphis and Dallas stations is not yet available. UPS has not yet released an RFP for construction of the new stations.

According to David Schultz, Vice President of Fuels for AGL Resources, “AGL is very pleased with its contract with UPS. The announcement by UPS that it will expand its LNG fleet is a powerful signal and may be a bellwether event, convincing other operators in this trucking segment that the time has come to convert their fleets to run on LNG.” On a May 8 corporate earnings conference call, Andrew Littlefield, President and CEO of Clean Energy Fuels called UPS’s purchase plan “ a significant milestone” in transitioning the U.S. transportation market to natural gas, and that he UPS announcement demonstrates that the “transition of natural gas as a vehicle fuel is happening.”

Not everyone is so sanguine. Kate MacKenzie, who reports on energy issues for FT Aplhaville was recently quoted in the Washington Post, with regard to UPS’s move to LNG trucks, “On closer examination, their commitment to natural gas-powered vehicles appears to range from a minor passing interest to a slightly bigger, but still fairly minor, interest.”

There continue to be disparate opinions as to how fast the market for NGVs will accelerate. 2014 may shape up to be a pivotal year. By then, Cummins-Westport’s new ISX12G engine will be in full production. A recent survey by PLS Logistics (see below) points to increasing acceptance of LNG trucks among trucking firm executives but access to fueling as the main barrier to LNG vehicle adoption. By 2014, Clean Energy Fuels will have built out its America’s Natural Gas Highway LNG fueling network and Blu LNG, which has 2 LNG stations open, will have added new stations, with 4 under construction and another 13 planned. Shell, which has announced plans to build up to 100 LNG stations, may have begun installation, although the date for installation of Shell’s first station has yet to be announced.

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