1000 LNG School Buses Payback: One Year

 | Jul 29, 2013 | 7:42 PM EDT  | Comments
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Student Transportation (STB) may not be your cup of tea given its Canadian withholding tax and a lot of its bountiful dividend covered in ways you may not be crazy about, but there's no denying its commitment to LNG vehicles. This is a company that's buying 1000 buses from Blue Birds -- a company owned by Cerberus Capital Management -- and what's most important is that Student Transportation is paying a price for them that makes them economical in year one because they are saving more than 50% per gallon equivalent of fuel.

The big rap against natural gas engines is that they are too expensive. We hear it endlessly. The payback's too long. But here's a case where a gigantic fleet buyer is saving a fortune using LNG and doing it now, not in the future.

Of course you could argue, well, of course, that's all well and good, because they don't use those buses at night and they can be filled when they are idle. But believe me, Student Transportation is the outlier not the rule. Further motivation -- nobody wants idling school buses spewing emissions around little kids at school.

United Parcel (UPS) today upped its 750 natural gas vehicle order for 2013 by asking for another 50 LNG trucks and 35 CNG trucks, so Student Transportation's move isn't, well, idle. But this is a small fraction of what has to occur if this country is going to be energy independent.

It is totally true, the infrastructure is not there. It has to be built. It is also totally true that this has been a big chicken and egg game: the infrastructure isn't built because not enough truck and bus companies are willing to switch. That's been because of cost. Diesel has to go up more and more outfits like Blue Bird have to create engines that don't cost much more simply because they burn LNG.

Remember 25% of our imported oil is used for diesel for trucks. Now, because this is one fossil fuel replacing another, even as it is homegrown and greatly helps our energy independence from many putative enemies, there has been zero support from the federal government -- even as it bends over backwards to do anything for the farmers who make ethanol and has given unbelievable breaks to the solar industry. That's what makes this transformation even more remarkable.

If Student Transportation is right about things, one day diesel engines will cost the same as LNG engines and be equal in power and the build-out will be much further along. It wouldn't shock me then if diesel, which took seven years to take over the truck market from regular gasoline, doesn't retreat back from where it came.

The only problem with that? I find it hard to believe that the White House would be willing, somehow, to let gasoline come down too far, which is what would happen once the build-out is complete. That said, it may be, at one point, crystal clear that the cleaner air benefits make the choice palatable. Right now, though, it's still too boutique to matter.

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