Natural Gas as a Transportation Fuel: Prospects and Challenges

Numerous policies and programs have been proposed at the federal, state, and local levels to encourage development of natural gas resources and promote natural gas vehicles (including, in the 111th Congress, the Natural Gas Act, S.1408, H.R.1835, Promoting Natural Gas and Electric Vehicles Act, S.3815, and Fueling America Act, S.1350). These measures employ a combination of tax credits, financing support, research and development assistance, and other incentives. In California, a low-carbon fuel standard that is currently being implemented may also encourage more natural gas vehicles. At the same time, many states are developing regulations to address the impacts of new natural gas operations.

On March 16, 2011, the Environmental and Energy Study Institute (EESI) held a briefing on the prospects for increased use of natural gas as a transportation fuel. Natural gas has a current price advantage over diesel fuel and gasoline (per gallon equivalent), emits fewer greenhouse gases when burned (per unit energy), and comes from mostly domestic sources at present. However, increasing and sustaining U.S. gas production will rely heavily on unconventional sources (shale gas, coal-bed methane, and tight gas), which face potentially rising costs, require continuous and intensive drilling, and present significant water supply, water quality, wastewater, air quality, land use, and seismic risk issues. The deployment of new vehicle technology and fueling facilities would also face cost and environmental challenges of using a gaseous fuel, including climate change implications of leaking methane, a powerful greenhouse gas. Other energy and non-energy uses of natural gas also compete for this high value resource. This briefing examined the economic, energy security, and environmental implications of a large-scale shift to natural gas trucks, buses, and cars, and related fueling infrastructure.

• Potential savings in fuel and operating costs are driving greater use of natural gas vehicles, especially for high-mileage and heavy-duty vehicles, which pay back a higher upfront vehicle cost more quickly. Vehicles that park in the same place each night, such as transit buses, delivery trucks, and other fleet vehicles are particularly good candidates because they minimize the need for fueling infrastructure.
• Natural gas prices have fluctuated widely in recent years, but are currently at relatively low levels—due to a slow economy and increased domestic production capacity.
• Even with this historic variation, natural gas has been less expensive than diesel fuel, with prices ranging from $1.00 to $2.50 per gasoline gallon equivalent (GGE) for compressed natural gas (CNG) over the last decade. Methanol is a liquid fuel that can be made from natural gas for approximately $1.30-$1.60 per GGE at current natural gas prices (between $4 and $6 per million BTU).
• Natural gas vehicles emit up to 80 percent less particulate matter, an especially problematic pollutant from diesel exhaust that causes asthma, other lung ailments, and premature death. Carbon monoxide emissions can be reduced 20-40 percent and volatile organic compounds (VOCs) by 10 percent.
• Compared to fuels made from petroleum, natural gas contains significantly less carbon per unit energy, and potentially could reduce greenhouse gas emissions (GHGs) per equivalent mile traveled. According to the California Air Resources Board, natural gas vehicles emit from three percent fewer GHGs (for liquefied natural gas from conventional sources) to 86 percent fewer GHGs (for biogas from dairy farms and landfills).
• Leakage of natural gas (composed mostly of methane, a greenhouse gas many times more powerful than carbon dioxide) throughout its supply chain also needs to be considered when evaluating greenhouse gas impacts. Natural gas leakage rates have not been well-studied, but with leakage rates as low as 1-2 percent, life-cycle greenhouse gas emissions of natural gas fuels could actually exceed those of diesel fuel.
• Increased natural gas production from unconventional sources, such as shale gas, is widely regarded as important to achieving a long-term, affordable natural gas supply. While shale gas reserves can be found over relatively large identified areas—such as the Haynesville, Eagle Ford, and Barnett shale plays in Texas, and the Marcellus shale in Pennsylvania—the most economically recoverable resources are concentrated in much smaller “core” areas, which may be even smaller than many operators are hoping and claiming.
• Shale gas production also faces significant local environmental issues such as impacts on quality and supply of surface water and groundwater resources, air pollution from intensive drilling operations (e.g. diesel exhaust), and transport and release of radioactive materials.
• While there have been cases of natural gas migrating into groundwater and drinking water systems—due to faulty water or gas well casings, or in Pennsylvania, because of geologic conditions and a legacy of 130 years of oil and gas drilling—the most challenging water resource problems from shale gas drilling are water supply and management of wastewater at the surface.
• A typical Marcellus shale gas well will require approximately 5 million gallons of water for a 2-5 day hydraulic fracturing operation.

Background

Numerous policies and programs have been proposed at the federal, state, and local levels to encourage development of natural gas resources and promote natural gas vehicles (including, in the 111th Congress, the Natural Gas Act, S.1408, H.R.1835, Promoting Natural Gas and Electric Vehicles Act, S.3815, and Fueling America Act, S.1350). These measures employ a combination of tax credits, financing support, research and development assistance, and other incentives. In California, a low-carbon fuel standard that is currently being implemented may also encourage more natural gas vehicles. At the same time, many states are developing regulations to address the impacts of new natural gas operations.