There’s no doubt about it – the shale gas boom of recent years is creating a paradigm shift in the North American energy industry. Hydraulic fracturing, or fracking, has uncovered a wealth of natural gas that has the industry in a tizzy over the potential development of an enormous new market: the natural gas transportation market.

Currently, 93% of America’s transportation fuel is petroleum-based, with heavy-duty trucks guzzling more than one tenth of US oil. Reducing America’s dependence on imported oil and increasing the use of natural gas vehicles is a primary goal of President Obama’s recently announced energy plan. Meeting the over-supply of low-cost shale gas with demand from heavy-duty trucks, trains, ships and private cars has the ability to revolutionize the global energy industry.

According to Natural Gas Vehicles of America, an  industry-funded trade group, there are over 1,000 natural gas fueling stations  scattered throughout the country servicing around 120,000 natural gas vehicles. Many of these are cars, buses and small trucks that run on compressed natural gas (CNG), a low energy density fuel.

Apache Corp, for example, is one early adopter amongst the industry giants leaning towards natural gas. Realizing the opportunity for using a lower-priced, cleaner fuel than diesel, Apache began building CNG fueling stations four years ago. It retrofitted its fleet of trucks to run on CNG and offered to help employees run their own natural gas vehicles (NGVs)s. However, deployment of the Apache Corp NGV master plan to dramatically increase their use and include heavy-duty, long-haul fleets has been stalled over debating which should come first – the vehicles that run on natural gas or the refueling stations?

To power larger vehicles with natural gas, a more energy dense fuel is required. Liquefied natural gas (LNG) is significantly denser than CNG and is more suitable for use in ships, trains and long-haul trucks. It must be stored in expensive cryogenic fuel tanks and maintained at a temperature of -260F. Shell recently showed its commitment to the transportation of LNG with a $300 million investment to build LNG filling stations at 100 locations across the US. It plans to set up networks for refueling trains and ships in Canada, across the Great Lakes and on the Gulf Coast.

Energy industry investor and co-founder of Clean Energy Fuels, T. Boone Pickens, has been pushing for natural gas as a transport fuel for decades, having built 70 LNG fueling stations for long-haul trucks in 33 states in the past year alone. Another example is Chinese investors ENN Group, who intend to build 50 natural gas filling stations in the US this year. As these organizations lead the way, they are optimistic that if the infrastructure is there, the fleets will come.

As we can see, the conversion to NGVs is gaining momentum. Commercial vehicles for industry giants General Electric, Proctor & Gamble, UPS, FedEx and Waste Management, the largest waste hauler in the US, will begin or expand conversions of their fleets in the coming year. Cummins Westport, a big engine manufacturer, will begin production of a 12-liter engine which will match a standard heavy-duty truck engine. This new engine may have the ability to steer the direction the industry develops, with truck manufacturers Freightliner, Kenworth, Volvo and Navistar planning to take deliveries.

As with any new industry, there are certain apprehensions. A major barrier to earlier NGV roll-out has not only been the expensive fueling stations, but also the high cost of the natural gas-compatible engine. Natural gas cars more expensive upfront and a LNG engine will set truckers back an extra $40,000-$80,000 premium on top of the $100,000 truck price. Even with cheaper LNG prices and a chance to reduce tailpipe emissions, it’s not an easy sell. Government incentives are enticing some but in an era of fiscal tightening, the longevity of these programs hangs in the balance. In addition to budget woes, climate activists are not without concerns. It’s true that carbon monoxide levels are 30% less when natural gas is burned compared to diesel fuel, but it’s the possible leakage of methane that environmentalists are condemning. Methane is a greenhouse gas more than 20 times as powerful in trapping heat in the atmosphere as carbon dioxide. A recent study concluded that based on estimated leak rates, the atmosphere would be worse off for 80 years before any benefits to the climate would be realized from a switch. Studies are ongoing.

Regardless of these concerns, it appears the enthusiasm for the emerging industry will be difficult to contain for much longer. With Obama unveiling his “Blueprint for a Clean and Secure Energy Future”, the incentives he is calling for could help accelerate the growth of natural gas infrastructure. And with many industry giants now mandating the use of cleaner fuel in their fleets and plans for natural gas infrastructure being rolled out, it won’t be long until America is revving its natural gas engines.

As the use of natural gas in the transportation industry increases, so too will the number of data points being collected and analyzed in ZEMA. You can find more information on ZEMA at www.ze.com.