Clean Energy Bets on Natural Gas

October 22, 2007

(Seal Beach, CA) -- In the race to provide clean alternative fuels for a diesel-addicted trucking industry, Clean Energy appears to be two steps ahead of its competitors.

The Seal Beach-based company, which provides natural gas fuels for trash trucks, public buses and municipal fleets across the country, is banking more than $70 million on proposed clean-air regulations affecting the sprawling Long Beach-Los Angeles seaport.

For Clean Energy, the bet is that these pending regulations will open a new market for natural gas vehicles in the goods-movement industry.

Eager to corner a virtually untapped market, the company has been quietly laying the groundwork for a new, environmentally friendly era in harbor drayage.

In recent months, Clean Energy began work on several key infrastructure projects in Southern California, including the region's first public LNG fueling station in Carson and a $55-million LNG "refinery" in the Central Valley town of Boron.

The company also plans to construct two additional LNG fueling stations within the port complex, and wants to expand its operations along the 710 industrial corridor stretching from the waterfront to East Los Angeles.

And to kick-start fleet turnover, Clean Energy purchased 100 Kenworth LNG container trucks which it plans to re-sell to local trucking companies that receive environmental grants from the state and ports.

The publicly traded company is banking on three key points in selling LNG to a goods-movement industry which has relied almost exclusively on diesel fuel for decades.

· First - most of Clean Energy's supply is piped in from Wyoming, Oklahoma, Texas and New Mexico to storage facilities in California and Nevada.

· Secondly - natural gas has historically been cheaper than petroleum. On a recent day, compressed natural gas fuel was retailing for $2.44 per "gallon," - nearly 60 cents cheaper than average diesel prices. Over the past two decades, CNG prices have hovered between 20 and 30 percent cheaper per vehicle fill-up than gasoline, according to the federal Department of Energy. (Note: Natural gas "gallons" are equivalent to the amount of energy provided by a liquid gallon of gasoline or diesel. For example, one gallon of gasoline and one "gallon" of CNG will get you roughly the same distance.)

· Third - and perhaps most importantly for local communities choking on port-generated diesel soot - natural gas is significantly cleaner than diesel fuels. LNG emits no asthma-causing diesel particulate matters or smog-forming nitrogen oxides, and burns between 20 and 30 percent less greenhouse gas than oil.

Growing air quality problems caused by port industry in the past decade prompted local air quality regulators to adopt a set of new regulations and incentives known as the Clean Air Action Plan.

In part, the plan seeks to replace all of the estimated 16,000 diesel container trucks currently serving the nation's busiest seaport. Specifically, the plan calls for using grants, tax breaks and private capital to pay for 5,300 or more LNG trucks.

Currently, there are two heavy-duty LNG trucks serving local ports, both purchased by Clean Energy to prove to skeptics the technology works.

But while LNG has its supporters, detractors bemoan the high cost for equipment like trucks and yard tractors. LNG trucks, for example, retail for $200,000 or more. And while Clean Energy is investing in public fueling stations for truckers, locations will, at least initially, be spread very thin. In addition, public backlash in California against several proposed LNG onshore and offshore receiving terminals have created a perception that the fuel is volatile and dangerous.

In reality, LNG fuel will only ignite when exposed to a very particular mix of oxygen. Petroleum, on the other hand, burns easily.

Whatever the perception, Clean Energy is confident that truckers, dockworkers, marine terminal operators and area residents will support LNG as a fuel source.

One of the first trucking companies to commit to LNG is Southern Counties Express, a large firm with long ties to the waterfront. The company recently received grants to partially offset the purchase of 71 LNG trucks in coming months. They hope to have all the vehicles on the road by March.

For Clean Energy, the huge investment makes sense.