July 9, 2015
Like a storm on the horizon, the industry has seen this coming, and now the wait is over. New “Phase 2” proposed emissions standards for heavy duty trucks were released by EPA on June 19 for public comment. The current Phase 1 standards for fuel efficiency and carbon pollution kick in starting in model year 2017. The new Phase 2 standards are expected to go into effect for the 2021 model year and ramp up through 2027. (http://www.epa.gov/oms/climate/regs-heavy-duty.htm).
This also marks a major step change for EPA in regulating Carbon Dioxide emissions from trucks and trailers. The previously issued Phase 1 standards, regulate CO2 on a gram/ton-mile basis or a MPG basis. This is on top of string of other regulatory standards which brought us SCR (Selective Catalytic Reduction) and DEF (Diesel Exhaust Fluid) to reduce Nitrogen Oxides (NOx), as well as Diesel Particulate Filters (DPF) which helped meet Particulate Matter (PM) standards. These standards added capital cost, complexity, and maintenance concerns to each tractor. UPS, in testimony before Congress, estimated that the SCR/DPF requirement added about $30,000 in capital and operating cost over the 5 year life of a tractor. The 2017 Phase 1 CO2 standards are expected to add at least $5,000 in capital cost to each tractor, plus maintenance on additional equipment that will be added to the engine.
These new Phase 2 standards are expected to add between $10,000 and $20,000 in capital cost to each tractor. The EPA estimates sit in the lower end of that range, as usual; and EPA forecasts a 2 year payback based on enhanced fuel economy. The US Government has a long history of underestimating costs, and overestimating benefits (see the Affordable Care Act, a.k.a., Obamacare) so take that with a grain or two of salt. One ray of sunlight is that EPA is not being overly prescriptive as to how each fuel efficiency targets are achieved, leaving it to OEMs to target engine performance and aerodynamics in the ways that are most cost effective (at least until 2021 when trailer modifications become mandatory). The standard purports to achieve up to a 24% reduction in CO2 emissions and fuel consumption over a 12 year period, which brings the CO2 emissions on par with today’s performance of Natural Gas tractors. Of course Natural Gas tractors will also benefit from the improved aerodynamics, and thus are likely to maintain an emissions advantage over diesel tractors, even beyond 2027.
According to one large operator who experienced problems with the new technology required by the first standards, "We need the time to flush out the technologies, to make sure they not only achieve what they say they will but also have the reliability for our operations. Some of the emission changes in the past were pushed out pretty quickly and the technology was not proven and really led to excessive down time and excessive costs in maintenance and repair costs." The he Owner-Operators Independent Drivers Association also questioned the proposed standards. "Based on reviews of initial summaries, we do have concerns that the rule will push truckers to purchase technology that is not fully tested and may lead to costs such as increased maintenance and down time that will eclipse the potential savings estimated in the proposal," the organization said.
With the release of the over 1300 page proposed rule, comes a 60 day public comment period, including several public hearings, which have yet to be scheduled. Often, once a proposed rule has been issued, it’s a rare comment that results in a change in the rule. Our advice, talk to your tractor and trailer OEM reps about how they intend to meet the standard, and the expected impact on your capital and operating costs.
Natural Gas Vehicle News
The Obama administration proposed new rules on Friday to slash greenhouse gas emissions from heavy, long-haul trucks, a move to attack climate change that prompted a wary response from industry groups worried about the costs. The new standards call for a 24 percent reduction in the fuel consumption of truck tractors by 2027 from anticipated 2018 levels. The proposed rules also require an 8 percent reduction in carbon emissions from new aerodynamic truck trailer designs
The long-awaited proposal for Phase 2 of the joint NHTSA/EPA greenhouse gas/fuel economy standards for heavy trucks was unveiled Friday, and will pursue an ambitious target of improving fuel economy by 24% by 2027 compared to 2018 model year trucks. Class 8 trucks are expected to climb in cost by 10-12% under the Phase 2 rules, which will affect model years 2021 to 2027 vehicles.
Waste Management in Plainfield Township, PA on Thursday unveiled its new fleet of 30 compressed natural gas-powered (CNG) collection trucks. Grand Central also demonstrated its first on-site public CNG fueling station. Its open 24 hours and available to anyone with a swipe card and a CNG-powered engine.
Class 8 net orders for May were just over 20,500 units, while Classes 5-7 orders totalled 19,900 units, according to the latest data from ACT Research. The slowdown in Class 8 order activity was expected, according to Steve Tam, ACT’s vice-president, commercial vehicle sector.
NGVAmerica has commended EPA and NHTSA for its proposed new round of emission and fuel economy standards for medium- and heavy-duty vehicles NGVAmerica says it will work with the EPA, NHTSA and the administration to finalize a Phase 2 rule that will create more opportunities to use natural gas to reduce fuel costs and emissions.
Gunnison County commissioners have sent a letter to the Colorado Energy Office (CEO) supporting a grant application for a compressed natural gas (CNG) station proposed in the county.
Milwaukee-based Wisconsin Energy (NYSE: WEC) will enter the compressed natural gas as a result of the company’s acquisition of Chicago-based Integrys Energy Group Inc. (NYSE: TEG) this summer. Integrys owns a business called Trillium CNG that runs CNG fueling stations and provides compressed natural gas fueling services.
Fuel Price News
Natural Gas: A Halloween Horror Story (WSJ Subscription Required)
Amid oil’s collapse, it is easy to forget the U.S. gas market has been struggling with shale-derived excess for years. While oil has rallied 12% in 2015, front-month gas futures are down about 2%. At around $2.90 per million British thermal units, gas is well below even its pretty dismal five-year average of $3.67.
EIA estimates show that global crude oil consumption increased by 0.9 MMbpd (million barrels per day) to 92 MMbpd in 2014. EIA estimates show that oil demand will continue to increase by 1.3 MMbpd in 2015 and 2016. The rising demand could support crude oil prices.
Natural Gas Prices Decline ahead of the Stockpile Data
Natural gas futures for July delivery trading in NYMEX fell marginally by 0.69% on Wednesday. Prices settled at $2.86 per MMBtu (British thermal units in millions) on June 17, 2015. The consensus of mild weather and the increasing stockpile pushed natural gas prices lower. Gas tracking ETFs like the United States Natural Gas Fund LP ETF (UNG) also fell in the direction of natural gas prices in yesterday’s trade.
Crude oil extended gains after the Energy Information Administration reported a decline of 2.7 million barrels of crude in the week ended June 12, a steeper drop than an estimated 1.7-million-barrel decline. West Texas Intermediate crude added 1.7% to $60.96 a barrel.
About Mansfield Energy Corp:
For 60 years, Mansfield has been creatively solving commercial, industrial, and municipal customers’ most demanding energy procurement, supply, and logistics challenges. Today, the company provides energy commodities and related services to 6,000 customers in 18,000 locations across the U.S. and Canada. The company’s expertise covers a broad range of transportation and facilities energy from traditional petroleum products, CNG, renewable fuels, and specialty chemicals to power and natural gas. Mansfield employees are committed to their customers’ success, abiding by five core principles - Integrity, Excellence, Conscientiousness, Innovation, and Personal Service. The company is headquartered in Gainesville, GA (just north of Atlanta) with regional operations centers located in Chicago, Dallas, Denver, Houston, Los Angeles, Minneapolis, Bloomington, MN, and Calgary, Alberta Canada.
For more information about Mansfield, call 800-695-6626, or visit our website at http://mansfield.energy.