With a big PR push from the natural gas industry, and a huge endorsement from oilman T. Boone Pickens, natural gas seems to be dominating recent headlines about fuel choice and reducing the U.S.'s oil dependency. Is natural gas here to stay? Can natural gas meet our energy needs? Will the public warm to the idea of driving natural gas vehicles? During today's OnPoint, Richard Kolodziej, president of NGVAmerica, the national trade association for natural gas vehicles, discusses some of the existing supply and price questions the natural gas industry faces. He makes the case for expanding offshore oil and gas drilling while continuing to support alternatives. Kolodziej also outlines the policies and incentives his industry is looking for in order to propel natural gas vehicles into the mainstream.
Monica Trauzzi: Welcome to the show. I'm Monica Trauzzi. With us today is Richard Kolodziej, President of NGV America, the national trade association for natural gas vehicles. Richard, thanks for being here.
Richard Kolodziej: I'm glad to be here.
Monica Trauzzi: Richard, natural gas seems to be the new buzzword around town, with T. Boone Pickens' plan, the nomination of Sarah Palin for V.P., a big ad push by the natural gas industry. We're hearing about natural gas everywhere. Why? Why now? Why are we hearing so much and where does natural gas fit into our energy future?
Richard Kolodziej: Well, you're hearing a lot about natural gas, but you're especially hearing about natural gas vehicles. The reason you're hearing a lot about natural gas is because we have a lot of it. It's a domestic fuel. I mean 85 percent, a little more than that of what we use in the United States is produced here. Virtually all of the rest is produced in Canada, versus 60 or 70 percent of the oil we're using that has to be imported. So we have a lot of natural gas and so you're seeing a focus now on domestic fuels. And when you couple that with the fact that they are now finding huge amounts of natural gas in what's called gas shale. It's a rock formation that has gas trapped in it. We've known about it for decades, but no one knew how to produce it. Well, they figured out how to produce it and now suddenly the resource base of natural gas in the United States is estimated to maybe have doubled. And so you're seeing a huge interest now in natural gas in general, especially now with natural gas vehicles, which is my trade association. And you're seeing that because, well, the price has gone up of oil and gasoline. We've always had wonderful benefits, greenhouse gas benefits, oil displacement benefits, urban pollution benefits. We've always offered that and we've always been cheaper, but that wasn't enough of a gap. Now, suddenly with gasoline at four dollars, there's a big gap.
Monica Trauzzi: But where do natural gas vehicles fit in when you compare them to electric vehicles or hybrids? Are they the better choice? Are they a good choice among all these other choices? I mean should people be flocking to natural gas vehicles?
Richard Kolodziej: Well, I'll try to be modest.
Monica Trauzzi: Of course, you'd like that.
Richard Kolodziej: Historically and even until very recently, policymakers and the public have wanted a silver bullet answer to solve the problem of transportation and our dependence on foreign oil. They wanted one answer that could solve all their problems. It would be cheap, it would be available, and then they could go about their business. That's not going to happen. Now, for a hundred years we have had one fuel for transportation, gasoline and diesel, petroleum, and we were very fortunate. Gasoline, as an energy source, is a really good fuel, a lot of energy in a small volume. If you put aside the greenhouse gas problems and the urban pollution problems and the balance of trade problems and the problems of dependence on foreign oil and our military, if you put those aside, it's a great fuel. And so for a hundred years we've had that fuel and, to a large extent, the whole economic development of the world, basically, was based on the availability of cheap, abundant petroleum. That's gone. We're not going to see that again. We're going to ...
Monica Trauzzi: So, are we just moving to our next addiction by having cheap, abundant natural gas?
Richard Kolodziej: No, no, no. The point I'm trying to make though is that there is not going to be one solution. If you look at every other market, residential, commercial, industrial, power gen, you see a wide variety of fuels being used, different applications, different parts of the country, where it makes sense. Transportation is the only place we have one fuel. That's the model we're going to go to. You're going to see a variety of fuels and a variety of technologies used in parts of the country and in applications where they make the most sense. And that's what we're seeing now.
Monica Trauzzi: So, should natural gas vehicles be seen as a stepping stone? We've been hearing a lot about this idea of making the bridge from now until we have more advanced biofuels. Or is there some permanence to the future of natural gas vehicles?
Richard Kolodziej: If you look at the technologies, natural gas vehicles are here and now technology. That's one of the reasons that Pickens' plan, I think everyone has seen those campaigns, has focused on that. I mean the Pickens' plan focuses on three here-and-now technologies; wind, solar, and natural gas vehicles. We don't need technology breakthroughs. We don't need environmental breakthroughs. We don't need economic breakthroughs. We have it here right now. It's a great technology. How long we're going to use natural gas is going to be a function of what happens in the future. I personally believe, as I mentioned before, we have a huge amount of natural gas in the United States and, if you look at the market, what the market says, it says that of all the applications for natural gas, vehicles are the highest priority, because the vehicle market is basically willing to pay a much higher price for natural gas than any of the other markets.
Monica Trauzzi: So, then it's no longer cheap?
Richard Kolodziej: No, no, I'm just saying that when gasoline is four dollars a gallon it's $32 a million BTUs. The most expensive market out there last year was residential. They paid an average of $12. What that says is that the public is going to be willing to pay more for natural gas in the transportation market than in any other markets. You know, when we used to have cheap gas we had a huge fertilizer industry in the United States. Once we stopped getting two dollar gas, now gas is like seven or eight dollars, once we've to it, the fertilizer industry got dinged.
Monica Trauzzi: But how can we be sure that the price of natural gas isn't going to continue to steadily climb, because it has gone up in recent years? So how can we be sure that it's not going to get to four dollars a gallon?
Richard Kolodziej: Sure, it has gone up. It has gone up slower than oil. It's actually decreased about 30 or 40 percent the last few months. It was $12 a million Btus and now it's like less than eight. And one of the reasons is because they're finding all this natural gas. Well, in the long term, no one really knows how much natural gas we have in the United States. We have all of the gas off the coasts in the Outer Continental Shelf. A lot of discussion now about OCS drilling and everybody is talking about oil. It's the gas that's out there. That's the big volume of energy out there off the coasts. So you have that.
Monica Trauzzi: So, you're saying drill, drill, drill, but drill for gas?
Richard Kolodziej: Well, no, just drill, drill for energy.
Monica Trauzzi: OK.
Richard Kolodziej: I agree with Boone Pickens. He says drill, drill, drill, but that's beside the point.
Monica Trauzzi: Yeah.
Richard Kolodziej: We can't get there, we can't get to energy independence by drilling our way out of it. We have to move away from oil. So drill, get the oil, use it, but in the meantime have a very aggressive plan to move away from oil. Now, down the road, you mentioned biofuels. There are three biofuels. There's ethanol, there's biodiesel, and there's biomethane. You can make natural gas out of any organic matter. Nature does that naturally, in a swamp you have natural gas percolating up. Anytime you have organic matter without oxygen, you know, breaking down without oxygen, it generates methane, which is the basic component of natural gas. And so if you can take animal waste or crop waste or sewage or landfill gas, the Department of Energy did a study a number of years ago that said just from animal waste and sewage in landfills, we could produce enough natural gas, biomethane, to fuel 10 million vehicles. Just from that. And I think the number now has increased significantly because we now have more landfills and we have better technology. In Europe what they're saying is that cellulosic biomethane, making methane, basic biomethane, out of cellulosic products is much less expensive and much more energy productive than going through the process of making ethanol and biodiesel. And so, if that's true, and we'll see how that plays out, you're going to see a lot more focus on renewable natural gas. And that renewable natural gas then can basically become the fuel for vehicles.
Monica Trauzzi: With all this focus on natural gas though, are we putting ourselves in a position where we're going to have to start importing natural gas in order to meet all these demands?
Richard Kolodziej: If we are wrong and there's not enough natural gas out there, the answer is yes, but that doesn't look like it's happening. It's just going the other way. As I mentioned before, we have doubled the resource, just about doubled the estimated resource base for natural gas in the United States. We now have 118 years of natural gas at the current levels of production.
Monica Trauzzi: Right, I think you're citing a recent report that came out that said that there's a lot more natural gas than we ...
Richard Kolodziej: Yeah, sure.
Monica Trauzzi: But that natural gas is coming from some unconventional sources that some people wouldn't be comfortable saying are definites for the future.
Richard Kolodziej: If you look at any of the discussion coming out of Chesapeake Energy or any of the companies that are in that shale formation, their stock is doing very well because the market realizes that there's going to be a lot of gas coming out of that shale. We don't even know how much gas will be coming out of that shale. Fifteen years ago there was gas available in what's called coalbed methane. When you have coal you have natural methane in the cracks in the coal. We didn't know how to mine it. It wasn't even part of the estimate. Last year 10 percent of the natural gas we used in the United States came from coalbed methane. In 10 years, I don't know what percentage, but a very large percentage of natural gas will be coming from that new natural gas from shale formation. In addition, there is something called methane hydrates. Off every coast, and North and South Pole too, but every coast, you go off the coast and you go deep enough, you will find ice formations and methane is trapped in it. They've estimated that there's twice as much energy in methane hydrates than all the coal, all the oil and all the natural gas in the world combined.
Monica Trauzzi: OK, we have just a couple of minutes left. I want to run through a few more questions. What do you need from Congress? What policies does your industry need in order to get the place where you want to be?
Richard Kolodziej: Well, obviously, we would love to have Congress provide to natural gas vehicles what they provided to ethanol vehicles. We would like to have major incentives to the auto companies. You know, the auto companies have financial problems. We would like the auto companies to make natural gas vehicles in the United States. Right now we have one company, Honda. It's the Honda Civic GX. It's the greenest vehicle, not us saying it, but the American Council of Energy and Environment says that it's the greenest vehicle produced in the world.
Monica Trauzzi: It's also more expensive than a traditional car.
Richard Kolodziej: Sure, I mean yeah, well, everything is going to be more expensive. Hybrids are going to be more expensive, fuel cells are going to be more expensive, everything is going to be more expensive because it's a more complicated technology.
Monica Trauzzi: What about the range issues that we're hearing about with natural gas vehicles?
Richard Kolodziej: I have a Honda Civic, I go 220 miles. Now, 220 miles, am I going to drive to New York? No, but that's not the market. The Honda Civic vehicle, right now, used by individual consumers, is a vehicle that goes to work and back, to school in back, you use it - 99 percent of my travel is perfect for natural gas vehicles. Now, if I have to go to New York, I use my wife's car.
Monica Trauzzi: Which is?
Richard Kolodziej: Oh, it's an Audi, but it doesn't matter. But the point I wanted to make before ...
Monica Trauzzi: A traditional vehicle.
Richard Kolodziej: The automakers, every automaker makes natural gas vehicles somewhere around the world. General Motors makes 18 models of natural gas vehicles somewhere, South America, Europe, Asia. They just don't make them here. What we want to see from Congress is support, support for the purchase of the vehicles, support for putting in the stations, and support for the automakers to make them.
Monica Trauzzi: The final question here, John McCain's V.P. pick, Sarah Palin, has been a big supporter of natural gas, a controversial natural gas pipeline. She's also a big proponent of drilling for oil and gas. What are your thoughts on that pick?
Richard Kolodziej: Well, I think anyone who is president or vice president needs to say we have to use natural gas more effectively and more in the United States. That has to be a higher priority.
Monica Trauzzi: And expand drilling?
Richard Kolodziej: Yes, you have to expand drilling. I mean you have to expand drilling for oil and gas while we transition to something else, in terms of whether it's gas shale, whether it's a renewable natural gas and biomethane, whether it's methane hydrates, whatever, we're transitioning. Where are we going to transition? Nobody knows. No one knows where we're going to go. The future is very cloudy. It might be fuel cell vehicles, it might not. It might be cellulosic ethanol, it might not. But right now, we know what we have. We have technology for natural gas vehicles that exists now. We have a resource base that's huge. We ought to use the natural gas.
Monica Trauzzi: So, keep our options open.
Richard Kolodziej: Yes.
Monica Trauzzi: All right, thanks for being here.
Richard Kolodziej: You're welcome.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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