Gas (LNG) Is Where It's At

I have no investment interest in the following company, or what they recommend.  I just found the  information interesting.  For a long time it was considered impractical to transport large volumes of natural gas in any way other than through pipelines.  This required those producing natural gas to have a nearby market, which made exporting the gas in tanker ships not an option.  Well that is changing, and it looks like in a big way.

There is a huge amount of natural gas underlying the North Slope of Alaska.  We've known about it for decades.  It amounts to Trillions of cubic feet of high value product that could be produced if a way could be found to get it to a market.  The same goes for all the gas in western Canada, and I imagine northwestern Canada's Mackenzie Delta region.  The potential is enormous.  All that is needed (no small task) are pipelines to get it to a seaport on Canada or Alaska's Pacific Coast and then into LPG tankers like those described in the following article.

I was thinking today of all the Liberty Ships and tankers built in just a few short years during World War II in American shipyards.  I also realized that America crushed the vast Japanese Empire over much of the Pacific and Asian area in just about four years, about the same amount of time the current Administration has been in office in Washington, D.C..  Trillions of dollars have been spent in the last few years by the Federal Government and what have they accomplished?  Precious little, to say the least.  My point is clear.  Something is dreadfully wrong.  I'll leave the details of that for another day, in another venue.  This is not really the place for politics.

So think about the possibilities that lie before us: we have abundant natural gas, producible with proven technology, and an eager market for it, primarily in Asia.  What are we waiting for?  I'm certain I'm not alone in this line of thinking.  Any comments?
Peter

LNG Carrier




Dear OGIB Reader,

In Part 1, I explained how the Japanese will most likely solve its power shortage, now that there are NO nuclear plants running.

One of the biggest answers is LNG—Liquid Natural Gas—and an emerging LNG technology that is growing around the world... and could be a fast answer to Japan’s dire need to quickly replace their nuclear power.
It’s called FSRU—which stands for Floating Storage and Regasification Unit. It’s a floating LNG import terminal — at less than half the cost of an onshore facility.  The benefits to Japan now—which is in a proverbial "space race" to meet its electricity needs, are that they can be ordered, made and delivered in 2-3 years, vs. 5-7 years for an onshore import terminal.

FSRUs and onshore LNG import terminals take LNG and regasify it—taking it from the liquid form, where it is reduced 600:1 in volume and expanding it back into a gaseous form where it’s usable to make electricity in your home, and for other uses.

Both facilities need a berth for the LNG ship, storage tanks and pipelines. But the traditional, land-based terminals can cost upwards of $700 million for a facility with a peak capacity of about 7.75 million tons per year (around 1 bcf/d). Terminals operate at roughly half of their peak capacity.

These onshore facilities can take 5-7 years to be planned, constructed and brought online, which means they are not ideal for Japan's current situation.

As I said, FSRUs are custom-built vessels — similar to the LNG carriers but with the ability to turn LNG into its gaseous form.

FSRUs not only get to market faster, but cheaper:  A newly built FSRU costs close to $260 million, according to Unit Economics (and they do the best research in this sector, by a nautical mile).

One company has even started converting old LNG carriers into FSRUs, for which Unit Economics says the cost is more like $160 million—and can be ready in just 14-16 months.

Another advantage is that they can be moved to wherever demand is highest for the regasification of LNG.

However, FSRUs have one big drawback—less capacity. Most have a peak capacity of around 4 million tons annually (about 500 million cubic feet per day), though some of the new ones are getting closer to 1 bcf/d.

A potential drawback for the Japanese could be that this technology is so new, there are only 10 working in the world right now, with another seven being tendered.

So while they are proven, they cannot yet be called mainstream. But there are already several large shipyards able to build them, and competition for bids is intense; i.e., there is a healthy supplier’s market.

Still, it should be noted that even if Japan goes with FSRUs, it will still to take some time for them to start importing LNG. This time gap is another reason Drolet believes nuclear reactors will have to come back online to meet the country's energy needs.

- Keith

Publisher's Note:  LNG is one of the only bull markets right now in energy.  The FSRU market is at the leading edge of this.  They are new and exciting, and the growth rate right now is huge—likely 100% in the next two years.  And the profits are rolling in fast for one of the leading companies in the space.  This company has already built and sold 4 of them.  The thing to keep in mind here — FSRUs are different than LNG carriers in that they are much longer contracts (10- to 20-year contracts), with great long-term cash flow—exactly the thing you can plan a dividend around.

And that's what this company has done — having increased its dividend in each of the last four quarters.  The total dividend increase during this time is 40%. How many companies are doing that in this market?

Analysts are calling for quarterly EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) to DOUBLE in the next quarter—a 100% increase in just one quarter. Its utilization is 100%, and operating profit margins are an eye-popping 80%.  That's why they are one of the most profitable companies in the worldwide energy sector.

I bought the stock this week myself.  And I encourage you to learn all you can about this play — Click here to keep reading...

American Natural Gas Changing The World?

In a sense, natural gas, being mainly methane (CH4) is a "renewable" resource.  Consider how it is produced in and from land fills, piles of manure, and so called "swamp gas".  Since this gas is so clean burning, (we use it in our homes every day) it is no wonder it is becoming so popular and useful all around the world.  The big question is, how much of it is there?

With the horizontal drilling and fracking taking place in shales, the future supply seems tremendous.  My question is it constantly being generated from the organic material in all these abundant shales around the world?  That would almost make it "renewable", would it not?  Any thoughts on this concept?
Peter

Why American Natural Gas Will Change The World

LNG Carrier Galea - IMO: 9236614 - Singapore

source: http://www.forbes.com/sites/matthewhulbert/2012/05/26/why-american-natural-gas-will-change-the-world/

‘It was the best of times; it was the worst of times’ – never a truer word spoken for the gas industry. Whilst Chesapeake is fighting for its life in the US, spot gas prices are reaching all-time highs in Asia. In this ‘Tale of Two Cities’ you’ll get $2/MMBtu in New York (Henry Hub) and around $20/MMBtu in Singapore (Asian spot). The divorce between the Atlantic Basin and Pacific Basin couldn’t be any starker – the question is whether these spreads will incrementally narrow under inexorable laws of economics, or whether politics will throw a spanner in the works. Depending on how you answer this ‘convergence question’ will have dramatic implications for hydrocarbon asset prices in the years to come. Not to mention the contours of international energy relations.

article continued here.

Matthew Hulbert, Contributor

Old-school energy, new world order

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Bet On Exxon Mobil

I'm betting with Exxon Mobil that natural gas demand and prices will increase.  Americans should applaud this which will make America more energy-independent and maybe pay off a little of our debt and even create some jobs.  That's a good thing, right?
Peter

Exxon Mobil sees big growth in natural gas demand

Zain Shauk

San Francisco ChronicleMay 31, 2012 04:00 AMCopyright San Francisco Chronicle. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Thursday, May 31, 2012

 

J. Scott Applewhite / AP

Exxon Mobil CEO Rex Tillerson says the oil giant is betting on growth in the demand for natural gas.

• Exxon Mobil sees big growth in natural gas demand 05.31.12

Dallas --
Exxon Mobil Corp. believes the demand for natural gas will grow, making it the world's second-largest energy source by 2040 - but the energy giant has a lot of gas that it wants to sell now, its top executive told shareholders at its annual meeting Wednesday.

"We're studying the possibilities of exporting natural gas from North America, from both the U.S. and Canada, because of the abundant supply that has now been confirmed in North America," CEO Rex Tillerson told shareholders.

The world's largest publicly traded company has bet big on the future of natural gas, which Tillerson believes will replace coal as the No. 2 fuel behind oil.
Exxon Mobil became the nation's largest gas producer after it acquired XTO Energy for $25 billion in 2010.

A surge in North American gas production has brought prices to their lowest levels in a decade and has created challenges for producers. Meanwhile, controversy swirls around the main drilling technique fueling the natural gas boom - hydraulic fracturing.

Tillerson said the economic pressures that have pushed natural gas prices down have not dampened the company's long-term outlook on gas.
"That's a transient condition," Tillerson told reporters after the meeting.

The meeting itself included criticisms from shareholders representing environmental concerns. Some protested the company's use of hydraulic fracturing, in which water, sand and chemicals are blasted underground at high pressure to release hydrocarbons locked in rock formations.
Among shareholder proposals were requests that Exxon Mobil draft a report on the risks of hydraulic fracturing  (fracking shown to be safe in numerous studies) and that it set greenhouse gas reduction goals.  (greenhouse gas theory and global warming totally discredited...see http://petesplace-peter.blogspot.com/ )

Both proposals failed by large margins.
Some shareholders saluted the company for its financial performance - a profit of $41 billion in 2011 - and its investments in education and other social programs.

Tillerson said the company's expectations that world natural gas demand will grow 60 percent by 2040 made its heavy investments, including its XTO purchase, valuable.
"There's no regrets," Tillerson said.

He said he expects natural gas demand to grow in North America, mainly for power generation and industrial uses. Transportation fuel growth will not be dramatic for private vehicles, although there is potential for added demand from commercial fleets, Tillerson said.

Zain Shauk is a Houston Chronicle staff writer. E-mail: zain.shauk@chron.com

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/05/30/BUHR1OPMS2.DTL#ixzz1wRNGuAbC

GM Is Catching On....Dual Fuel Pickups, Compressed Natural Gas Or Gasoline

I want one......to heck with those itty-bitty death trap electric toy cars......
Peter

Posted Monday, Mar. 05, 2012

By Tim Higgins

Bloomberg News

SOUTHFIELD, Mich. — General Motors plans to begin taking orders in April for pickups that run on both gasoline and compressed natural gas, potentially reducing costs for users.

The Chevrolet Silverado and GMC Sierra 2500 HD extended-cab pickups will be offered with a 6.0-liter, V-8 engine that can "seamlessly" transition between natural gas and gasoline, the Detroit-based automaker said today.

A vehicle such as the ones GM will offer can save a driver $6,000 to $10,000 in fuel costs over a three-year period because CNG is cheaper than gasoline, said Joyce Mattman, director of GM commercial product and specialty vehicles.
more here

Natural Gas, A Real "Alternative" Fuel For Vehicles

Natural gas, because of its clean burning characteristics, has long been used to power vehicles such as fork lift trucks inside warehouses.  Consider how clean burning natural gas is, many of us cook our food over natural gas stoves in our enclosed kitchens.  Now that we have an abundance of gas, thanks to the combined technologies of horizontal drilling and hydraulic fracturing, why not use this gas to power our cars and trucks, in addition to generating electricity and heating our homes as is already being done.  It makes sense to me and many others.

Now this gas is being used to power vehicles in Louisiana, by EnCana, ironically, a Canadian company.  They produce a lot of gas in Louisiana from horizontal wells drilled in the Haynesville Shale.  (Some of which I proudly helped steer while drilling.)  The following article comes from "The Shreveport Times" and shows and describes what EnCana has going.  This was not done because of Federal government subsidies, or even encouragement for that matter, just intelligent free market enterprise.  Do you hear that Mr. Obama?  This is economic activity, job creation, and wealth building you can count on.  Fire all your current advisers, they don't have any idea what they are doing.
Peter

source: http://www.shreveporttimes.com/article/20120225/NEWS01/202250325/DeSoto-LNG-station-first-Louisiana

DeSoto LNG station first in Louisiana

NEAR FRIERSON — A liquefied natural gas fueling station formally opened Friday by EnCana Natural Gas Inc. at the Relay Station holds the distinction of many "firsts." It's the first:

• LNG station open in Louisiana.
• Public LNG station in the U.S.
• Location for Heckmann Water Resources to use LNG trucks.

And when the Relay Station in a couple of months opens its compressed natural gas pumps, the facility will be the first in the state to offer four fueling options: LNG, compressed natural gas, or CNG, gasoline and diesel.

(continued)

Horizontal Drilling And Geosteering Enable Shale Gas Production

In all the excitement (in some circles) about the production of gas utilizing the combination of "horizontal" or directional drilling and hydraulic fracturing of these wells, it is rarely, almost never, (outside of technical journals) described or discussed HOW these wells are drilled. How are they guided, how are they "steered" into and through the desired layers of rock, in this case shale? Many technologies are brought to bear in finding and producing this gas. Much of that work is held tight by energy companies and much of it goes unheralded. But that will change.
Peter

The Quiet Energy Revolution

FROM-American

By Max Schulz

How ironic that during the ‘drill, baby, drill’ demonstrations as gasoline prices spiked in 2007 and 2008, a silent revolution with natural gas was already underway that will make those concerns largely irrelevant

The 20th century was the century of oil. Wars were fought over it, and the outcomes of the century’s biggest conflicts hinged on the stuff. In World War I, for instance, Churchill’s conversion of the British Navy to oil gave the crown’s ships supremacy over German vessels. In World War II, when the Nazis and Japanese each failed to secure supplies of oil, they were doomed. Later, President Ronald Reagan, CIA Director William Casey, and America’s Middle Eastern partners manipulated global oil production to bankrupt the Soviet Union and win the Cold War. In the first half of the century, oil policy served as the catalyst for military victory. In the second half, oil helped propel the greatest economic expansion in the history of the world, and liberated mankind from the tyranny of immobility.

All hail oil! But not too much, because the 21st century won’t be defined by oil. It is more likely to be defined by a different fossil fuel: natural gas.

Two monumental shifts in the world of energy are underway right now: one technological, the other financial. They will change the way we power our lives (especially our cars), provide a real measure of energy security, and help curb greenhouse gas emissions. Neither shift has anything to do with the turn to a green renewable energy economy promised by President Obama.

Physics ensures that will never happen, no matter how much wishful thinking (and government subsidy) is applied. Sorry, greens, carbon-based energy will continue to dominate our energy future, not windmills or solar panels.

The first profound shift was made possible by a little-noticed technological breakthrough in the last three years that has changed the way we extract natural gas. Engineers now make use of two important innovations.

One is horizontal, or directional, drilling, which permits wells to move laterally beneath the surface instead of going straight down. This technology minimizes the number of holes that have to be drilled, leaving a smaller surface footprint and accessing a larger area.

The other technology is hydraulic fracturing, used to extract gas trapped in porous shale rock. In this process, also known as fracking, water and chemicals are pumped at tremendous pressure into shale rock formations to push gas into pockets for easier recovery.

By marrying and perfecting the two processes into a technology called horizontal fracking, engineering has virtually created, from nothing, new natural gas resources, previously regarded as inaccessibly locked in useless shale deposits. Suddenly, the mammoth shale formations in Texas, Pennsylvania, Ohio, New York, North Dakota, and elsewhere have the potential to produce abundant amounts of gas for decades to come.

How significant are these developments? Exxon Mobil announced in December that it will pay $41 billion—that’s right, billion—to acquire XTO Energy and its expertise at extracting unconventional natural gas resources. The French energy company Total SA, meanwhile, is paying $2.2 billion to acquire a 25 percent stake in Chesapeake Energy’s Barnett Shale operations in Texas.

Human ingenuity has turned theoretical gas reserves—too costly ever to be exploited—into practical resources. And just in time. Less than a decade ago, experts were noting that conventional natural gas production had begun to plateau, despite annual increases in the number of wells drilled. The National Petroleum Council warned in 2003 that “North America is moving to a period in its history in which it will no longer be self-reliant in meeting its growing natural gas needs.” In the spring of 2004, Federal Reserve Chairman Alan Greenspan warned that, driven by these looming shortages, wellhead natural gas prices might top $6 per thousand cubic feet by summer, roughly double 2002 prices; and indeed, until the recession brought down demand, natural gas did sell in the $5–$9 per thousand cubic feet range.

Horizontal fracking has helped eliminate many of those grave worries. As Pulitzer-prize winning author and energy analyst Daniel Yergin and his colleague Robert Ineson wrote recently in the Wall Street Journal, production in the lower 48 states “surged an astonishing 15 percent from the beginning of 2007 to mid-2008.” And this is just the tip of the iceberg, as production ramps up in the nation’s shale formations, such as in Marcellus, Bakken, and Haynesville. What was once a shortage has given way to a glut, or, as Yergin and Ineson put it, a “shale gale.”

Proven reserves of natural gas in the United States have been revised upward by 50 percent in the last decade, and those numbers are sure to climb higher as more shale gas is discovered. Perhaps not surprisingly, other nations are sending geologists to the United States to study techniques for extracting gas from unconventional sources. China, India, and Australia all have enormous shale fields. In the coming decades, the shale gale won’t be just an American phenomenon; it will blow all over the globe.

A technological advance created the first shift, driven by free markets not by government edict. The second shift complements the first, and has taken place again because of the way free markets work. That is the formation of a global market for natural gas, much the same as the global petroleum market.

We are accustomed to think of crude oil as a global commodity, its price the same roughly all over the world. Partly that is because oil is so easily transported. Turn on the taps, and a tanker ship can be filled with liquid crude before heading for any seaport on the planet. On land, oil can travel by pipeline, by truck, or even by the barrel or the one-gallon container. The portability of oil helped an international market begin to blossom more than a century ago.

Natural gas and natural gas markets, however, are different. Ethereal and highly flammable, natural gas poses significant transportation problems. A tanker ship can’t simply fill up and shove off. For this reason, there has been no single global market for gas, but a number of balkanized, regional markets all over the planet. The price of natural gas in one region has little connection to the price in another, and for many years regions facing shortages could not be relieved by gas from regions with excess capacity.

That is changing, not as rapidly as the shale gale has transformed America’s gas picture, but still rapidly compared with other business transformations. The reason is liquefied natural gas (LNG). Innovations in liquefaction and re-gasification technologies allow gas to be condensed to 1/600th its size, which then can be shipped by sea. Major infrastructure investments by energy companies and governments, along with the development of specially designed double-hulled tankers to transport LNG, are creating a robust, integrated market for natural gas.

The implications are profound and largely positive. The new mobility of LNG will bring a sorely needed measure of market stability after the past five years of unpredictability in price and supply.

On the other hand, some observers fear that creating a global marketplace will spur the establishment of a nefarious natural gas cartel similar to oil’s OPEC. Such worries, however, overstate a potential cartel’s capacity to manipulate a diversified, global market, particularly one in which nations like Australia, Canada, and the United States will be heavyweights. Indeed, one truly positive benefit is that the emergence of a market for LNG will severely limit Russia’s ability to use its significant gas resources as a political and economic weapon, as Moscow has done in recent years with its European neighbors.

LNG, along with the shale gale, should help keep natural gas prices low for a long time. The average wellhead price for natural gas in the United States had crept to $8 per thousand cubic feet in 2008. There is little doubt that high energy prices were among the contributing factors to the economic downturn that began in the latter half of 2008. An ocean of cheap gas augurs well for America’s and the global economy’s future.

Natural gas may also change how we drive, and enable ordinary consumers to break oil’s monopoly on transportation. As my colleague, Peter Huber, notes in a recent Manhattan Institute report, “Gas-handling technologies [have] improved quite enough to make natural gas a practical alternative” to oil. After all, gas is cheaper than gasoline and diesel per unit of energy. That’s why large stationary power plants that used to run on oil switched to natural gas long ago.

The chief obstacle to developing a natural gas infrastructure capable of supplying service stations and highway rest stops is regulatory. If that is removed—and here we do need government action—we could expect to see trucks, buses, and cars running on natural gas in a relatively short period of time. The reduction in greenhouse gas emissions would be considerable.

We may also see continued inroads of gas into the electricity-generating sector (which can also affect transportation as we move to hybrid and electric vehicles). Gas emits about half as much carbon per unit of energy as coal. With worries about long-term gas supplies allayed, expect regulators and utilities to favor construction of new gas-fired power plants over controversial coal plants, which are more expensive to build anyway. This same thing happened during the 1990s, and gas shot to a 20 percent share of America’s electricity economy as a result.

The Energy Information Administration estimates that U.S. demand for electricity will rise 26 percent by 2030. Gas-fired power is slightly more expensive than coal-fired electricity today and much more expensive when the wellhead price of gas soars. But stable, lower long-term gas prices brought on by the shale gale and the emerging LNG market will ensure that coal’s pricing advantage is not so pronounced. Gas is well positioned to help meet that increase.

The age of oil took off with a boom when the Spindletop gusher blew in 1901. A century later, as the price of oil hit new records, our politics were inflamed by an acrimonious debate over offshore oil drilling and breaching the Arctic National Wildlife Reserve. How ironic that during the “drill, baby, drill” demonstrations as gasoline prices spiked in 2007 and 2008, a silent revolution with natural gas was already underway that could make those concerns largely irrelevant.

Max Schulz is a senior fellow at the Manhattan Institute

More...

Chevron And Australia Investing In Gas

It seems the powers-that-be in Australia recognize the importance and value of offshore drilling and energy independence. Compare the following kind of investment and activity in Australia to the current attitude of the United States' Government.

I wonder how many wind turbines or square miles of solar panels it would take to equal the energy equivalent to Chevron's claimed 40 Trillion cubic feet of natural gas "resources" in Australia. These are American dollars (lots of them) being invested in Australia and not America. How intelligent is that? Ask your Congress-person. The following article is interesting.
Peter



Chevron begins massive Australian offshore project
Bloomberg News
March 25, 2009, 5:59AM (source)

Chevron Corp started its biggest-ever exploration campaign off Australia’s northwest coast, targeting finds that will underpin planned liquefied natural gas-export projects.
The drilling, costing “hundreds of millions of dollars,” will include as many as 10 exploration and appraisal wells this year, Roy Krzywosinski, managing director of Chevron’s Australian unit, said today in an interview. It aims to find more gas to supply the planned Gorgon and Wheatstone LNG projects, he said.

Australia’s northwest ranks among Chevron’s four highest- priority exploration regions worldwide, alongside the Gulf of Mexico, West Africa and the Gulf of Thailand. The Gorgon venture may cost A$50 billion ($35 billion), Western Australian Premier Colin Barnett said this month, making it the nation’s biggest resources project.

“Long-term resource security is vital to underpin these massive investments such as Gorgon and Wheatstone,” Krzywosinski said by telephone from Perth. The projects are “the top priorities” for San Ramon, California-based Chevron to drive the company’s growth in gas, he said.

Chevron said Jan. 29 it is maintaining worldwide capital spending at about $22.8 billion this year, bucking a budget- cutting trend among petroleum producers, as it seeks to halt two years of drops in output. About $2 billion will go on exploration, mostly in the four priority areas, Krzywosinski said.

Chevron Chief Executive Officer David O’Reilly said March 10 that the company and its partners in Gorgon, Exxon and Royal Dutch Shell Plc, expect to give the go-ahead in the second half to build the delayed project. It will have an initial production capacity of 15 million metric tons a year, about 76 percent of Australia’s existing LNG capacity.

The 100 percent-owned Wheatstone LNG project is running about 18 months behind Gorgon in the development line-up, and Chevron expects to start initial engineering and design work on that venture in the second half of this year. The work may last until late 2010 or early 2011, Krzywosinski said.

“We’re making a lot of progress on both of these projects,” he said. “I hope to have some good news in the second half of 2009 both on the front of Gorgon as well as Wheatstone.”
The first well in the Australian program, in the Exmouth Plateau area, is under way using the Atwood Eagle rig, he said. A second rig, the Ensco 7500, arrived in Australia this week from the Gulf of Mexico and is due to start drilling at the Exxon-operated Jansz field in early April as part of the Gorgon venture.

Any success in the drilling would add to the discoveries made at Wheatstone in 2004, Chandon and Clio in 2006 and additional gas found at the Iago field in July. Six appraisal wells drilled last year in the Wheatstone-Iago area last year doubled the resources there, Krzywosinski said.
Chevron will pay $550,000 a day for the “ultra-deepwater” Ensco 7500 rig while it is being used in Australia, up from the $365,000 daily rate payable while the rig is in transit from the U.S., Dallas-based Ensco International Inc. said in August.

LNG is natural gas chilled to liquid form, reducing it to one-six-hundredth of its original volume, for transportation by tanker to destinations not connected by pipeline. Chevron has gas resources in Australia of about 40 trillion cubic feet, Wood Mackenzie Consultants Ltd. estimated in February last year, making it the largest holder in the country.
www.bloomberg.com

We Have All This Gas, Let's Use It!

Change I can believe in. In these difficult economic times it makes complete sense to use America's abundant supplies of gas and convert our vehicles to run on compressed natural gas. The gas is found nearly everywhere, we have pipelines, the conversion process is relatively simple and inexpensive, the gas is the cleanest-burning fuel available, the process would create untold thousands of jobs, and generate significant revenue for local, state and Federal treasuries. Why aren't we doing this?

See what they're doing in Shreveport, Louisiana.
Peter

March 25, 2009
Lawmakers pushing LNG use in vehicles
Legislation to offer tax credits for drivers who convert vehicles.
By Mike Hasten mhasten@gannett.com (source)

BATON ROUGE — Sen. Nick Gautreaux, D-Meaux, and Rep. Jane Smith, R-Bossier City, sometimes don't agree on politics but they do agree on promoting the use of something that's plentiful in their regions — natural gas.

The two lawmakers from opposite ends of the state are pushing legislation that they say will stimulate the economy while improving the environment by utilizing compressed natural gas to power automobiles.

The bills, expected to be pre-filed later this week for the legislative session that begins April 27, offer tax credits for drivers who convert their existing gasoline-powered vehicles to run on CNG or purchase new vehicles already equipped. Also, credits are offered to filling stations that install the necessary equipment to fuel the vehicles.

"We have the opportunity in the state of Louisiana to be a national leader in this," Smith said. "We have something that's abundant, it's clean and it's American."
Smith said the Haynesville Shale in northwest Louisiana contains enough natural gas to power vehicles for decades.

"I've been told that if a cubic foot of natural gas is the size of a basketball, in the Haynesville Shale there are 250 trillion basketballs," she said. "We're sitting here on the supply, but we lack the demand."

Smith and Gautreaux said their legislation making it more affordable to convert vehicles and install fueling stations can help create the demand.
"This would provide jobs and wean us off foreign oil so we can depend on ourselves, instead of depending on somebody else," said Gautreaux, whose district includes the Henry Hub, the nation's national gas pricing station. Also, since natural gas is clean-burning fuel, "a lot of environmental problems, especially in cities, go away."

The city of Baton Rouge, which has been cited by the Environmental Protection Agency for air quality violations, has initiated a plan to convert its fleet of vehicles to burn CNG.
The lawmakers' legislation would increase the current tax credit for purchasing "qualified clean burning motor vehicle fuel property," which includes the additional costs of purchasing an already-equipped LNG-burning vehicle, the equipment to convert a vehicle and the costs of developing property directly related to the delivery of an alternative fuel.

Smith said vehicle owners could receive a state credit of 50 percent of the cost of converting a vehicle. If it costs $5,000 to convert, $2,500 could be claimed as a tax credit, which directly lowers the amount of tax owed to the state.

Gautreaux said new vehicles built to burn natural gas are more expensive, so a credit of 10 percent or $3,000, whichever is less, could be claimed toward the difference in sales price. Current law allows a $1,500 credit.
Combined with federal government tax credits, "this could make the extra cost of buying a natural gas vehicle zero," he said.

Smith and Gautreaux say that once a vehicle is converted, drivers notice improved performance and a lower-priced fill-up.
Gautreaux said that instead of the 86 octane of regular gasoline, the octane rating of CNG is 130.
Smith said that when gasoline was selling at $4 a gallon, CNG was $1.50. It's currently selling at about $1, which Gautreaux said shows that the price is not nearly as volatile as gasoline.
And, "it's safer than gasoline," he said
.
Another part of the legislation grants a 50 percent tax credit on the cost of developing fuel stations, which Gautreaux and Smith said would make CNG more widely available. Some filling stations already have it available.

The legislation is supported by the Louisiana Oil and Gas Association and the Louisiana Mid-Continent Oil and Gas Association.
Smith and Gautreaux say they have several lawmakers who want to be co-authors when the bill is filed.
Additional Facts
Comparison
According to state Rep. Jane Smith, R-Bossier City, when regular gasoline was selling for $4 a gallon, compressed natural gas only cost $1.50.