Covington is moving ahead with plans to build a compressed natural gas fueling facility, and now city officials must decide how big of a station to build, how to pay for it and who’s going to build it.
The Covington City Council held a work session Monday to discuss the latest findings in the project, and the initial idea is to build a station that will probably cost around $1.2 million based off the cost of an existing station in Rock Hill, S.C.
All told, the council could spend around $2 million or more over the next couple years to build a station, converting vehicles to CNG or buying new-CNG vehicles and retrofitting or building a new maintenance bay. However, none of those decisions have been made, and the council will have to vote on every part of the project separately, including when to officially bid out the construction project.
City officials have thought for years about building a CNG fueling facility and converting at least part of the city’s fleet to CNG to save money on gasoline and diesel costs that have not only been high in recent years, but unstable as well. Natural gas is plentiful in the United States, unlike oil, and the city has the added benefit of selling natural gas itself.
A fueling facility would also allow the city to sell CNG to outside customers, including other governments, the school system and retail customers.
City Grant Writer Randy Conner said the commercial costs for a gallon of gasoline equivalent of CNG he’s seen are between $1.95 and $2.25; however, Snapping Shoals EMC, an area electricity company, pays around $1.64 per gallon equivalent. If the city had its own fueling facility, it would be able to fuel its vehicles cheaper because it’s a wholesale seller of natural gas.
As far as financing goes, the city could either fund the entire project itself, partner with a private company to build and operate the facility or partner with the Municipal Gas Authority of Georgia, a nonprofit consortium of natural gas sellers.
The city has $800,000 budgeted this year for the project. City councilmen Chris Smith and Keith Dalton were the most vocal in their support and both advocated either the city build the project itself or seek favorable financing from MGAG, which has set aside $5 million to help communities build CNG fueling facilities. Conner said MGAG just made its decision and has no parameters yet for giving out the money, so the city is basically free to make any proposal it wants to MGAG, and the nonprofit will decide whether to accept such an offer.
The reason the councilmember didn’t want to partner with a private company is because the city would have to share profits and control with the company, in addition to the fact the private company, according to Conner, would also likely require some sort of promise from the city to purchase a certain amount of fuel every year. If the city for some reason did not purchase enough fuel to meet the quota, it would likely be required to pay the difference.
One of the benefits to having a partner in the deal is the city could spend less money on building a facility and more money on converting its vehicles to CNG, where it would see immediate savings. While there is money to be made in selling CNG to outside government, business and the public, the CNG market is still developing and it’s unclear yet how much in retail sales the city could expect.
Mayor Ronnie Johnston hoped to see that question researched.
In order to make the costs more reasonable whatever option is chosen, the city may be able to make its conversion to CNG in multiple steps. The fueling facility will likely be built in fiscal year 2014; some CNG vehicles could either be purchased new or diesel and gasoline vehicles could be converted in fiscal year 2015; a CNG maintenance facility could then be built in fiscal year 2016.
The vehicles where the city stands to benefit the most from the conversion are larger trucks, and possibly police cars, which not only rack up a lot of miles but also are on, including idling, for large periods of time. CNG also burns much cheaper and the vehicles generally require less maintenance, Conner said.
The city also is eligible for two federal tax credits, including a tax credit on the sale of fuel and one on the building on the facility; the latter credit is worth up to $30,000. Because the city is a tax-exempt organization, the credits would be given to the city in the form of money, Conner said. The credit for fuel would pay the city 50 cents per gallon equivalent of CNG sold, Conner said; the credit exist to boost the domestic expansion of CNG sales in the U.S.
In this case, the city would have to spend money to save money. Cars and light trucks cost about $11,000 to convert to CNG; school buses and large trucks can’t even be converted, but new CNG-powered vehicles must be purchased at a steep premium. However, the savings rack up quickly based on the money saved in fuel.
Police cars and garbage trucks are two of the biggest users of fuel in the city because they travel a lot, but also are on a lot idling. Based on analysis by Conner, most vehicles would pay for their premium or conversion cost in about three to five years, depending on how much fuel they used.
Conner did an offhand analysis, assuming a variety of police cars and trucks were converted to CNG; those 12 vehicles were estimated to use 78,129 gallons of fuel, which would result in a savings of $142,452 in one year. The cars would also require less maintenance and have longer life spans.
One area the city would have to also invest in is a new maintenance facility. The traditional maintenance bay would either have to be converted or a new facility would have to be built with special lighting and electrical systems to prevent any potential issues with natural gas that is released into the bay. Conner conservatively estimated the cost at $250,000.
A facility would not have to be manned 24/7, but a person would have to always be on call. Conner estimated a facility the size Covington is discussing would require two employees to be fully trained in the technology with another employee at least partially trained in how to handle emergencies.
One concern is the city’s ability to market the CNG fueling facility to the public, which would be crucial to attracting retail sales; however, MGAG might be willing to help in the marketing, since they are the one who sells natural gas to Covington and would benefit from increased demand.
Conner said he and others traveled more than 3,000 miles across the Southeast studying CNG fueling stations, and not one government or school system that had made the conversion and investment complained about its decision.
Though specific specs were not given, council members seemed to be in agreement with pursuing a station along the lines of the one in Rock Hill, S.C., which has a couple of pumps and a modern, aesthetically-pleasing canopy design. That station cost $1.2 million to build. The facility would likely be made to be easily expandable.
Conner said Covington would fit nicely into the existing network of CNG stations, which currently allow a person to find enough CNG stations along the way to travel all the way from Birmingham, Ala. to Columbia, S.C.