Natural Gas Savings Dependent on Taxes

Despite the higher upfront costs for engines that run natural gas, The Conference Board of Canada says that converting fleets to natural gas could produce savings of approximately $150,000 per truck over a 10-year period.

With the cost of installing a natural gas engine estimated at $80,000 per vehicle, the switch is a no-brainer, the Board said in a press release.

“Our models indicate that while the capital costs are high, the savings from lower fuel costs make natural gas an economically viable fuel for the trucking sector,” said Vijay Gill, co-author of Cheap Enough? Making the Switch From Diesel Fuel to Natural Gas. “Trucking firms could reap significant net benefits in operating costs while also reducing their environmental impact.”

The report examines the potential for natural gas as an alternative to diesel as a transportation fuel for heavy-duty trucks in particular, as well as for rail and marine operations.

Typically, natural gas trades at about half the price of crude oil per unit of energy — a gap that continues to grow, leaving room to cover the additional cost of compressing or liquefying gas for transportation.

GHG emissions would fall by more than 50 tonnes per truck per year, the Board said. That is assuming no additional demand is generated as a result of the lower operating costs.

However, there are a couple of hurdles to overcome before everyone jumps on the natural gas bandwagon.

“Nearly half of the estimated savings from natural gas vehicles are in the form of fuel tax savings, as natural gas is currently exempt from the equivalent of a road diesel excise tax,” the report explains. Much of the above savings is because natural gas is exempt from excise taxes. If 10 percent of fleets began running on natural gas, the Globe and Mail pointed out, “federal and provincial revenues would take a $350-million hit,” giving governments good reason to shift tax codes.

The refuelling infrastructure, already underway, also needs to be widespread and competitive with other fuels, the report notes — “especially as liquefaction adds to costs and reduces the life-cycle energy balance.”

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