Natural Gas Transportation Gets a Boost... From Garbage

David Fessler
by David Fessler, Energy & Infrastructure Strategist, The Oxford Club

Natural Gas Transportation Gets a Boost... From Garbage

by David Fessler, Investment U's Energy and Infrastructure Expert

Wednesday, May 11, 2011: Issue #1510

A few months ago, I explored how the increased use of liquefied natural gas (LNG) will be a major game changer for the transportation industry.

It's something T. Boone Pickens has advocated for nearly three years in his Pickens Plan. His question is simple. The United States has at least a 100-year supply of natural gas. Why shouldn't we gradually use it to reduce our dependency on foreign oil?

He has primarily focused on 18-wheel trucks. They use anywhere from 20,000 to 30,000 gallons of diesel fuel each year. Nationwide, that equates to more than one million barrels a day of imported oil.

Until recently, Congress politely ignored his suggestions. But as we know too well, government is very good at creating problems. It rarely solves any. Solutions almost always come from the private sector.

LNG Gains Traction With Big Business

That's exactly what's occurring with the use of LNG as a motor fuel. Pickens must be pleased. Several companies have begun to make the switch. The first is one of the largest trucking companies in the country: United Parcel Service (NYSE: UPS).

UPS recently initiated an LNG pilot program. The company will be using 48 LNG-powered trucks to haul its freight trailers between Ontario, California, and Las Vegas, Nevada.

In a recent piece from The New York Times, Michael G. Britt, Director of Maintenance and Engineering at UPS, said, "It's the only long-term viable option to diesel."

A pilot program is one thing. Wholesale commitment to run a major trucking fleet on LNG is something else.

The Leading Company in Waste-Based Energy Technology Converts to LNG

But that's become a primary goal of Waste Management, Inc. (NYSE: WM).

Waste Management is the country's largest provider of waste and environmental services. It's the largest municipal waste recycler. It's also the leading company in waste-based energy technology.

The company already has 1,000 of its fleet of 32,000 trash-hauling trucks on natural gas. But now it's embarking on a 10-year, $5-billion plan to convert its remaining vehicles. This year, 80 percent of Waste Management's truck purchases are natural gas-fueled vehicles.

The company estimates that it'll save $350 million on fuel annually. Lower maintenance costs will result in additional savings.

Waste Management is undertaking something much larger than converting its trucks over to natural gas. In his Sustainability Report 2010, Waste Management's CEO, David Steiner, revealed his plan to completely reinvent its business model. Waste Management is the largest recycling company in the country. It estimates the 125 million tons of trash it hauls every year contains $8 to $10 billion in value.

Mining that value goes directly to its bottom line. That's exactly what Waste Management plans to do. Its 34 recycling facilities process 8.5 million tons of recyclables annually. The company plans to increase that to 20 million tons by 2020.

Steiner's focused on recovering value from the waste streams he processes. That will provide raw materials that have lower carbon and water footprints.

In addition to the recyclables recovered directly from waste streams, methane gas is recovered from landfills. Besides being available to run its growing fleet of natural gas trucks, this gas can be used to generate energy.

Waste Management Produces More Renewable Energy Than Solar Industry

Readers may be shocked that Waste Management produces far more renewable energy than the entire solar industry. It accomplishes this simply by creating energy from waste.

According to the Energy Information Administration (EIA), about 800,000 megawatts of solar energy were produced in the United States in 2009. In that same year, Waste Management's 119 waste-fueled energy plants produced 8.6 million megawatts.

That's enough power to run about 1.1 million homes. The company plans to double that number by 2020.

It's becoming clear from the attention that natural gas is getting at both Congressional and industrial levels that the landscape is changing for America's abundant, clean fossil fuel.

While prices are certainly well below their highs of a few years ago, investors may want to consider adding exposure to natural gas either in the form of one of the major pipeline carriers, or a company like Waste Management.

Good investing,

David Fessler

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