By Michael McNutt
Gov. Mary Fallin, joined by 12 other governors, asked nearly 20 auto manufacturers Monday to produce more affordable compressed natural gas vehicles for state fleets that would be available for the average car buyer, too.
The nonpartisan effort, first announced last fall by Fallin and Colorado Gov. John Hickenlooper, also would increase the demand for natural gas and likely reverse plummeting natural gas prices, which would aid energy-rich states such as Oklahoma.
Natural gas producers pay a state tax on their production so new markets should help the state's coffers and make it more of a reliable revenue stream.
"Despite their potential as a much more affordable form of transportation, CNG vehicles continue to be held back by a "chicken and egg' scenario," Fallin said. "Consumers won't buy cars with limited fueling stations and high price points, and the industry can't build an affordable car without adequate demand.
"We can break that cycle by using the combined purchasing power of these 13 states," Fallin said. "By purchasing CNG vehicles for state automobile fleets, these states are encouraging the development of more CNG infrastructure and fueling stations, and can now work with manufacturers to develop an affordable and high quality product. The result will be a CNG vehicle that has the potential to save money on transportation costs for both state governments and families."
A letter signed by the 13 governors was sent Monday to 19 auto manufacturers with plants in the U.S. They reinforced their commitment to buy CNG vehicles for state fleets, both as a cost-saving measure and means to incentivize the manufacture of affordable and functional CNG automobiles.
"Abundant, affordable, clean-burning natural gas presents a tremendous opportunity for America to realize an energy future using domestic resources to fuel our nation's transportation needs," the letter states. "To that end, we are committed to explore the aggregation of our annual state fleet vehicle procurements to provide an incentive to manufacture affordable, functional natural gas vehicles."
The letter refers to a multistate request for information and asks manufacturers to provide background and information in anticipation of a multistate solicitation later this year.
Participating states are Oklahoma, Colorado, Wyoming, Pennsylvania, Utah, Maine, New Mexico, West Virginia, Kentucky, Texas, Ohio, Mississippi and Louisiana. Letters were sent to General Motors, Volkswagen, Kia, Mercedes-Benz, Nissan, Toyota, Honda, Volvo, Hyundai, Chrysler, Ford, Mazda, Jaguar-Land Rover, Subaru, Porsche, Mitsubishi and Daimler.
Fallin said that, besides saving money on fuel costs, encouraging the use of CNG vehicles and CNG fuel has wider economic implications.
"The United States has an abundant supply of natural gas resources that are currently supporting millions of jobs throughout the country," she said. "By promoting CNG use, states are supporting the production of an American-made energy source that creates American jobs and reduces our dependence on foreign oil."
Natural gas prices have been about $2.19 per 1,000 cubic feet; state budget officials are using an estimate of $3.64 per 1,000 cubic feet for the 2013 fiscal year, which begins July 1. Natural gas companies pay a gross production tax on their product, but if natural gas drops below a monthly average of $2.10 per 1,000 cubic feet, the gross production tax that the state collects drops to 4 percent from 7 percent.
Taylor Shinn, Chesapeake Energy Corp.'s senior director of corporate development, said the Oklahoma City-based company commends the governors' commitment to buy CNG vehicles to help develop the U.S. market.
"Natural gas vehicle technology is available, fueling infrastructure is increasing, and with these governors' efforts, the market for natural gas as a transportation fuel will continue to grow," Shinn said. "America needs an alternative to foreign oil and these governors, led by Gov. Fallin, recognize that natural gas is not only half the cost of gasoline, but better for our country's bottom line."
Fallin's energy secretary, Mike Ming, told a House of Representatives committee earlier this year that mass production of CNG vehicles also would bring down the price of conversion kits for typical car buyers. Such kits cost between $6,000 and $10,000 -- putting natural gas vehicles out of the price range for many buyers; if the states' offer is accepted, the cost could be reduced to $1,000, he said.