Bossier City needs out of the CNG fueling business

It was trendy. It was political. It used lots of “free” money. But in the final analysis, the decision by Bossier City to push compressed natural gas and ethanol vehicle fuels is turning into a taxpayer ripoff.

In 2010 next to city hall, and then a year later south of Barksdale Air Force Base, Bossier City built stations to provide these fuels to the few vehicles that could use them. The stations cost $5 million to build, but federal government grants chopped a third off of that price. Through 2012, 2 million gallons of these alternative fuels, netting the city a negligible pittance of money, had been dispensed to city and private vehicles.

But the real justification in the city’s eyes was it could fuel its own vehicles with this. The E85 mix generally sells for not much less than regular unleaded gasoline, but the CNG can be half of that. By converting some of its fleet, and for free – about 100 of them new or existing for about $600,000 in state money – then the per gallon savings could add up, not only because of the lower cost, but also the CNG gets about a quarter times more mileage per gallon.

The problem is, they don’t add up fast enough. Let’s assume (going by an average number) that every one of these CNG vehicles gets 43 miles per gallon (some will get less). Assuming the city spent no dollars on conversions courtesy of grants, and that maintenance costs equaled out, and that, somewhat unrealistically high in value, there’s a savings of $2 a gallon on CNG, this means to pay back the $3.4 million that went into building the stations (and assuming no maintenance costs), each vehicle would have to operate for 731,000 miles. That’s not going to happen, so let’s say they get a third of that before changing over the fleet, twice. That means unless they get generous grants from government to pay for the extra conversion costs – generally $5,000 per vehicle – only then will this have paid for itself.

And while conversion of other vehicles is taking place, it questionable whether those too will provide any kind of payback not just for the vehicles, but for the city-owned fueling stations. Earlier this summer, with another planned soon and a gradual phaseout over time, an Emergency Medical Services ambulance was purchased, estimated to save $7,000 a year on fuel. But the ambulance cost $325,000 in 2012, which is almost three times the amount that the company charged for a similar, diesel-powered ambulance for Ohio governments for 2011 models (although add-on options could increase that base price by tens of thousands of dollars). Given the average 20-year life of a vehicle, it is unlikely to pay for itself as opposed to a diesel version.

Given the over-promising of the benefits of use of this technology, the slow adoption by the public of such vehicles absent huge government subsidies (which, of course, are hidden costs to taxpayers not included in this calculation), and that those large subsidies increasingly are being pared back and are being called into question by wiser policy-makers at the state and national level, this may never happen. But if any kind of cost-benefit analysis was done by Bossier City politicians before embarking on this scheme, it wasn’t obvious.

Instead, the lure of grants, the overhype of the benefits of CNG (it’s not that much “cleaner” in carbon emissions than is petroleum, when considering the entire production and usage cycle of it), but most importantly the politics of the situation took precedence. With the emergence of Haynesville shale exploration and drilling, this building and conversion could stimulate use of a “hometown” resource that could assist area industry.

Yet it didn’t have to become a provider of these fuels to do so. In some ways, Shreveport has gone even more whole hog into the alternative fuel craze by converting (again, with taxpayer support from other levels of government) dozens of buses and trash compacting trucks, and some city vehicles, to CNG. But at least it had the sense to encourage the private sector to provide, and it did with a Time-It Lube franchise partnering with a major supplier Chesapeake Energy to create a station the city could use, meaning it could get out of its own self-supplying business. Also in the development stage is another station by Ivan Smith Furniture.

By eschewing a huge capital investment as did Bossier City, the payback (which, again, would be far distant in the future if ever without taxpayer-funded grants) for Shreveport will come, and perhaps not even past the next generation. So this points to the course of action for Bossier City.

Simply, now that it appears a market, even if driven in the main by government vehicles, exists for this type of vehicles that would support private sector providers. So, for Bossier City to recoup some investment for its citizens, it should sell these facilities and would continue to enjoy fueling without having to cover much fixed costs.

Not that its politicians have been very forward-thinking in this manner, as the city has a reputation for collecting cost-ineffective assets that otherwise should have been left to the private sector, such as an arena, parking garage, and high-tech office building, that ending up wasting the citizenry’s resources. They’ve wasted tens of millions of dollars, and a few more millions may be added unless egos are parked to get the city out of the CNG fueling business.