"NATURAL GAS VEHICLE FUELING UPDATE"
PACIFIC OIL CONFERENCE
GRAND SIERRA RESORT, RENO, NEVADA, SEPTEMBER 17, 2012

This is a commercial fleet fueling business. We love the consumers but we can't make a buck on them today.

We actually built something in California. We put it in the Mojave Desert so we could get away with it — it's a production plant in Boron, California.

Economics — natural gas is the cheapest alternative fuel. We can talk about saving a fleet $1.00 to $1.50 per gallon. Vehicles cost more, so you have to make up for it, but if you burn enough fuel, you can get there with that savings.

We have just found the mother lode of natural gas in the country, right under our feet. Engineers always knew natural gas was in shale rock. Now they've figured out a way to extract it for use domestically. Estimates range from a 100 to a 200 year supply.

Natural gas is a very clean burning fuel and it works in a combustion cycle the same way as traditional gasoline.

10 years ago, the market driver was environmental and mostly air quality related. Natural gas was a hard economic sell but the push was there because of the environmental issue. Now the economic drivers are there.

The reality is we are in a state of long-term high prices for oil. The reality is it's a commodity that will chase the market. The cost of oil is what the market will bear for it.

95% of the world's transportation runs on oil globally. OPEC controls 80% of the reserves. In August, the U.S. spent $37.8 billion importing 333 million barrels of oil, about 56% of all the oil used in August. We're used to these numbers because we've heard them for so long. But think about what it would mean if that money was kept domestically and used for local production and jobs.

CNG is what most people are familiar with. CNG vehicles run just like a gasoline car. The fuel comes from a pipeline under ground through a nozzle and into the vehicle. It's a very consumer-friendly fuel.

The big compromise with natural gas is vehicle range. When you store gas on a vehicle in cylinders, you cannot store as many gallons. The energy density is not the same. I drive a Honda Civic and it goes 260 miles. For a commuter car in Southern California, that's perfectly adequate. But for a fleet manager that's something to consider.

For a station, the question comes down to what kind of vehicles are you fueling and how fast do they need to fill. You can do a small station or a large station that can fill big rig trucks. They take different compressors. A big station requires a big compressor.

The vast majority — if not 90-95% of stations — are built for small trucks. If you pull up a big rig and it has a small compressor and it fills at one gallon per minute, it's going to take a big rig 70 minutes to fill up.

Nothing we do is cheap. It's really expensive. It's a good thing the fuel is cheap.

You can put the storage and compressor somewhere else on site and run piping to the dispenser. They don't need to be close.

You must have adequate pressure gas supply to your site. If you have low pressure gas coming onto you site, you're going to need to spend more time and money compressing it.

LNG is a liquid because it's been chilled to -250 degrees F. You have to keep it cold from the moment it's produced to the moment it's used in an engine. You do that through double-walled insulated tanks, cryrogenic trailers for transfer. It's all passively kept cold. There is no additional cooling in the supply chain. There is a shelf life. It does not stay cold indefinitely. In a vehicle, you have a week to 10 days before the gas starts venting off. If you use your vehicle all the time, it's not a problem.

We want the drivers to have a fueling experience that is as similar as they can get to what they're used to.

Natural gas tanks are all above ground, either vertical tanks or, if there are height limits, horizontal tanks. With natural gas tanks you don't have to worry about leaks. Natural gas is lighter than air, so if there's a leak, it just floats away. There is no environmental clean up to worry about. It doesn't pool on the ground.

The Port of Long Beach station is the largest LNG truck fueling station in the world. We sell Blue LNG, Green LNG, and CNG. It has 6 dispensing lanes and we'll expand it to 10 lanes when the market expands.

You have to be insane to talk to somebody about getting rid of their tried-and-true diesel fleet to a CNG fleet. But it is happening and we're getting some traction.

There are no federal incentives to use natural gas — they have all expired. There is a state incentive for California but that's because we have so much money we don't know what to do with it and we have no state budget problems.

Dispenser units are CGE for CNG, gasoline gallon equivalents. LNG is dispensed in DGE units, Diesel Gallon Equivalents. Approximately 1.7 gallons of LNG is one gallon of diesel.

What does a fueling station cost? It depends on your location, the kinds of vehicles you want to fuel, and how fast you want to fuel them. You could put in a putt-putt station for less than $1 million. A decent station that will fuel several vehicles at a decent rate is $1-1.5 million. A truck fueling station would be $1.5 million or more, depending on how large you want to make it. Where there is an opportunity to invest money to make money, the private sector will step up.

We opened a station in Las Vegas earlier this year. England Trucking and UPS fill up there and we hope others will follow suit soon, once they know it's there.

We like to partner with other people in the market so we can add natural gas fueling to an existing location. We'll build the fueling site with the equipment. But there are things we don't do, like build convenience stores or truck washes. When we partner, it allows us to provide a location where the driver can go into the c-store and buy what they want or use the other services.

California has a good network of stations from the Mexican border to L.A. to San Francisco and all the way over to Sacramento.

In California, there is no limit to what we pay for electricity. From the infrastructure side, in order to make a truck CNG station, you need as much power as a small hospital at every single site. When you look at the demand for power, you could be paying more for CNG than diesel. That's why we decided to go with LNG at our California stations.