Wichita company seeks to sell compressed natural gas to fleet vehicles
08/21/2014 8:02 AM
08/21/2014 6:47 PM
George Bruce wants to put gas in your car, just not the usual kind.
Bruce is founder and CEO of Sterling CNG, which stands for compressed natural gas.
CNG as a motor fuel isn’t a new idea, but its acceptance has been slow.
The way Bruce – also CEO of the family drilling company, Aladdin Petroleum, and an attorney at Martin Pringle – tells it, compressed natural gas is a no-brainer financially for the owners of high-use vehicle fleets. And he has developed a business model to make it especially easy for fleet owners to switch from diesel.
It works like this: Sterling CNG installs a gas compressor at the company’s fleet headquarters and continues to own the compressor. The vehicles fuel up with CNG as needed. Sterling meters the usage and bills the company every month. The fuel charge covers the cost of the natural gas, the federal and state taxes and the company’s costs, including the cost of building the compressors, plus profit margin.
The gas comes through the gas companies’ regular natural gas lines, but because of volumes used, Sterling can buy the gas at wholesale, rather than retail, prices.
Natural gas is cheaper than gasoline or diesel, by $1.50 to $2 per gallon, everything included. Bruce said they can supply CNG at the pump that is equivalent in energy to a gallon of gasoline for about $1.75 per gallon.
“It’s economically compelling,” he said.
What is powering that differential, Bruce said, is that over the last five to six years, oil has risen to $90 to $100 per barrel, while gas has fallen to $4 per 1,000 cubic feet. And it appears likely to stay there for years.
The big hurdle in getting companies to switch is the cost of converting gasoline-powered vehicles to run on CNG, which he estimated at $3,500 to $7,500 per vehicle. That is why his company is pitching the fuel to fleet vehicles that rack up 20,000 miles a year or more.
There are companies that install kits that will enable vehicles to run on both fuels, Bruce said. If the CNG were to run low, the vehicle will automatically switch over to gasoline. That aims at one of the big criticisms of CNG: Because there are so few refueling stations, owners can’t risk driving the vehicle far beyond the city limits.
Customers can opt for a CNG compressor that will fill vehicles overnight, or, if they want to pay more per gallon, Sterling will install tanks and a unit that will fill vehicles within a few minutes, said Sterling’s sales manager Tom McAndrews.
There is at least one CNG station already in Wichita. Midwest Energy Solutions, based in Kansas City, Kan., opened a CNG station at 29th and Ohio about a year ago.
The station has done OK, but not as well as company President Michael Batten thought it would.
He said businesses in Wichita are interested, but just haven’t been willing to pull the trigger on converting vehicles to the cheaper fuel.
Oklahoma, he said, is way ahead of Kansas, offering significant subsidies to set up stations and lower fuel taxes. There are only a few stations in Kansas, and more than two dozen in Oklahoma.
Although Sterling CNG will be a competitor, Batten said he’s actually happy to see the new company because he hopes Bruce and McAndrews will create a much bigger market.
“If they’re promoting CNG and getting them into CNG vehicles, I say go team,” Batten said.
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