By Edward McAllister
NEW YORK, March 9 Propane, once considered a low
value by-product of U.S. oil and natural gas production, is
finding its niche as a transport fuel in rural America where
other gasoline alternatives struggle to gain a foothold.
The propane being pumped into trucks and buses that ply
America's backroads is generally cheap, abundant and requires a
simple infrastructure to deliver. That gives it an advantage
over natural gas and electricity, the non-oil power sources
often used for vehicles in cities or on major highways.
On Wednesday, United Parcel Service made the biggest
bulk purchase of propane-powered vehicles in the United States,
taking 1,000 such trucks to replace gasoline and diesel vehicles
in rural parts of Louisiana and Oklahoma. In the $70 million
deal, UPS also plans to build 50 fueling stations.
UPS has already shifted some of the firm's trademark
brown-van fleet to using natural gas, which remains the cheapest
alternative fuel at current prices. Those running more rural
routes have proved more difficult to wean away from oil.
"All this time we have been looking for opportunities to
deploy in smaller scale and propane fits that bill perfectly,"
said Mike Casteel, director of fleet procurement at UPS. "The
propane infrastructure is very low cost, it's a fraction of
The shift shows how the U.S. shale energy boom continues to
change the way America uses energy, with abundant natural gas
and other by-products like propane further eroding oil's
decades-long dominance as a transportation fuel.
Natural gas remains the leading alternative for heavy duty
vehicles, including ships and potentially even locomotives, but
interest in propane is slowly rising, especially in rural
regions where many homes still rely on the gas for heating.
Roush CleanTech, which makes propane fuel systems for trucks
and buses, this week unveiled its first propane-fueled Ford F-59
van. It expects total propane unit sales to rise to 6,500 units
this year, up from nearly 4,000 last year, according to Todd
Mouw, a VP of sales and marketing at Roush.
BUCK TWENTY-FIVE A GALLON
UPS's move comes as fleet owners look to cut fuel bills by
moving to cheaper alternatives. A drilling boom has pushed down
the price of propane and natural gas way below gasoline.
Propane offers savings of on average $1.25 per gallon at the
pump. Natural gas can be even lower.
Interest does not appear to have been dimmed by the sharp
but brief spike in price during this year's bitter winter, which
shone a light on infrastructure constraints and export projects
that contributed to shortages across the Midwest.
"Propane supplies are growing in the U.S.," said Roy Willis,
president of the nonprofit Propane Education and Research
Council. "The problems this winter were just driven by
extraordinary demand for heating."
The interest is propelled in part by the ease of building a
propane fueling station. Natural gas or liquefied natural gas
fuelling stations can cost hundreds of thousands of dollars to
build. An above-ground propane tank, meanwhile, can be installed
in a day for less than $50,000.
Propane, delivered to filling stations in trucks, does not
need to be hooked into a pipeline system, as is the case with
"The more rural the area, the less likely it is that a gas
line is going through it," said Mouw. "They don't have any
opportunity for natural gas in those rural locations so they are
starting with propane."
Natural gas has grown in popularity for heavy duty vehicles
like refuse trucks that run on predictable routes. Companies
like Clean Energy, backed by oil tycoon T. Boone Pickens, have
invested heavily in fueling stations in major cities and along
But fueling stations remain in clusters in transport hubs
like Los Angeles and New York that can guarantee regular
"The homes that use propane for heating tend to be in more
rural areas as well," said Dave Hurst, analyst at Navigant
Research. "So it doesn't surprise me that vehicle refueling
follows that same path."