The Fundamentals of Natural Gas in Transportation Florida Seaports Natural Gas Workshop Rob Vickers CDM Smith Tallahassee, FL April 10, 2014 The Fundamentals of Natural Gas in Transportation

Presentation Overview Introduction to Natural Gas in Transportation Sector Economic Considerations Florida-Specific Findings Other Modes: Rail and Seaports Intermodal Opportunities Florida Seaports Natural Gas Workshop

Florida Seaports Natural Gas Workshop Natural Gas Basics Compressed Natural Gas (CNG) - Natural gas under pressure (compressed to pressures above 3,000 pounds per square inch) which remains clear, odorless, and non-corrosive Liquefied Natural Gas (LNG) - Produced when natural gas is cooled to minus 260 degrees Fahrenheit through a process known as liquefaction Sold in units of diesel or gasoline gallon equivalents (DGEs or GGEs) based on the energy content of a gallon of gasoline or diesel fuel More than 15 million natural gas vehicles in service Navigant Research projects 35 million in service by 2020 Florida Seaports Natural Gas Workshop

Benefits of Natural Gas Energy Security – 97% of the natural gas used in the U.S. is produced in North America Lower Emissions - 20-30% fewer greenhouse gas emissions and significantly reduced tailpipe emissions compared to petroleum Reduced Maintenance Costs – Cleaner burning, quieter, longer engine life Comparable Performance – Similar to conventionally fueled vehicles in terms of power, acceleration and cruising speed Fuel Costs – Savings of 40% - 50% compared to gas/diesel Florida Seaports Natural Gas Workshop

Florida Seaports Natural Gas Workshop Natural Gas Vehicles The number of OEM vehicles is growing CNG vehicles are cost-effective for high-mileage, centrally-fueled fleets that operate within a limited area The greater fuel capacity of LNG vehicles means they are often the preferred option for long distance travel Most popular heavy-duty applications: Transit/School Buses Refuse Trucks Shuttle Buses Tractor Trailers Step Vans Florida Seaports Natural Gas Workshop

Total Annual LNG/CNG Heavy Duty Truck Sales North America 2013-2022 Florida Seaports Natural Gas Workshop

Natural Gas Fueling Infrastructure DOE reports 160,000 gasoline fueling stations nationwide In comparison - 1,069 CNG and 146 LNG fueling stations nationwide (2012) CNG Stations: Fast-Fill vs. Time-Fill Fast-Fill stations are ideal for retail situations serving light- and medium duty vehicles Time-Fill stations are typically used by heavy-duty fleet operators who fuel at a central facility overnight LNG Stations dispense a liquid fuel and are structurally similar to gasoline and diesel stations Natural gas fueling facilities vary considerably based on size, capacity, and the type of fuel dispensed Florida Seaports Natural Gas Workshop

July 2013 Average Fuel Prices on Energy Equivalent Basis Florida Seaports Natural Gas Workshop

Costs of Natural Gas Vehicles/Infrastructure Initial NGV investments are significant… Representative heavy-duty CNG truck costs $63,600 more than diesel equivalent prior to incentives (2011 DOE Report) CNG conversion cost for new light-duty vehicles generally ranges between $12,000 and $18,000 CNG fueling facility cost range from $10,000 to $2 million depending on the size and application LNG fueling site can range from $1 to $4 million The good news on costs… Incentives are available to help off-set initial vehicle costs Station builders/operators provide turn-key facilities Florida Seaports Natural Gas Workshop

Natural Gas Vehicles/Stations in Florida In 2011 DOE reported there were fewer that 3,000 NGVs in operation in Florida Examples of businesses and agencies converting to NGV: AT&T Leon County Schools Waste Management Saddle Creek J.J. Taylor Companies Numerous transit agencies 60 natural gas stations in Florida 48 stations operational (18 public/30 private) 12 stations planned (10 public/2 private) Florida Seaports Natural Gas Workshop

Natural Gas Fueling Facilities in Florida Florida Seaports Natural Gas Workshop

Florida Natural Gas Fuel Fleet Vehicle Rebate Provides eligible applicants a rebate for the cost of conversion or the incremental cost incurred in connection with conversion, purchase or lease of a natural gas fleet vehicle Maximum rebate is $25,000 per purchased/leased or converted vehicle, not to exceed 50 percent of eligible costs Each applicant may receive up to a total of $250,000 per fiscal year on a first come, first serve basis To qualify, the vehicle must be part of a public or private fleet and must be placed into service on or after July 1, 2013 60% of funds allocated for commercial applicants and 40% allocated for governmental applicants *See DACS Office of Energy for additional information Florida Seaports Natural Gas Workshop

Other Modal Applications: Rail Both GE and Caterpillar are developing natural gas-powered locomotives Burlington Northern, Union Pacific, and Norfolk Southern are collaborating with locomotive manufacturers (CSX is reviewing the technology) Stricter emissions standards and fuel cost savings are driving the interest in LNG Beyond the technological challenge of developing LNG-fueled locomotives the industry must address logistical hurdle of getting LNG to distribution networks Florida Seaports Natural Gas Workshop

Other Modal Applications: Seaports Once again, stricter emissions requirements and fuel cost savings are driving the maritime interest in LNG In October 2008 member states of IMO adopted new tiers of NOx and fuel sulfur controls for the newly established North American Emissions Control Area (ECA) 2015 fuel sulfur standard of 0.1 percent fuel sulfur expected to reduce PM and SOx emissions by more than 85 percent Stringent ECA fuel standard is expected to be met through fuel switching Conversion to more expensive distillate fuel or installation of emission control devices for ships operating on residual fuel Florida Seaports Natural Gas Workshop

Current/Future Emission Control Areas Florida Seaports Natural Gas Workshop

Key Considerations in Maritime Investments in LNG Natural gas commodity prices are low relative to marine petroleum fuels To be used as a marine fuel natural gas must be liquefied to increase its energy efficiency (limited liquefaction facilities) Conversion of vessels to LNG is expensive (conversion of engines, installation of LNG storage tanks and related safety systems and ship modifications) Fleet operators should focus on vessels with high utilization and fuel use relative to size and engine power (maximize fuel cost savings) Economics of any specific project will hinge on: (1) vessel fuel use; (2) delivered LNG prices; and (3) vessel conversion costs Florida Seaports Natural Gas Workshop

Intermodal Opportunities Summary of CNG Port Drayage Truck Demonstration Program Timeline: 2010 to 2014 Natural Gas trucks deployed: 219 Partners: South Coast Air Quality Management District, CA Energy Commission, CA Air Resources Board, Ports of Los Angeles and Long Beach, U.S. DOE, Clean Cities Coalitions Objectives: increase use of alternative fuels; significant reductions in diesel air pollution; create/preserve jobs to stimulate the economy; increase end-user experience with alternative fuel vehicles Results: Increased use of alternative fuels (reduced consumption of diesel fuel); significant reductions in NOx and diesel PM emissions; reduced air toxic emissions and associated public health risk; reduced GHG emissions; preserved/created jobs related to manufacturing, natural gas refueling, maintenance and operation of the natural gas vehicles Florida Seaports Natural Gas Workshop

Potential Application: ILCs Florida Seaports Natural Gas Workshop