Natural Gas Passenger Vehicles: Availability,
Cost, and Performance
Brent D. Yacobucci
Specialist in Energy and Environmental Policy
February 3, 2010
Congressional Research Service
7-5700
www.crs.gov
RS22971
CRS Report for Congress
P
repared for Members and Committees of Congress
Natural Gas Passenger Vehicles: Availability, Cost, and Performance
Summary
Higher gasoline prices in recent years and concerns over U.S. oil dependence have raised interest
in natural gas vehicles (NGVs). Use of NGVs for personal transportation has focused on
compressed natural gas (CNG) as an alternative to gasoline. Consumer interest has grown, both
for new NGVs as well as for conversions of existing personal vehicles to run on CNG. This report
finds that the market for natural gas passenger vehicles will likely remain limited unless the
differential between natural gas and gasoline prices remains high in order to offset the higher
purchase price for an NGV. Conversions of existing vehicles will also continue to be restricted
unless the Clean Air Act (CAA) is amended or if the Environmental Protection Agency (EPA)
makes changes to its enforcement of the CAA.
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Natural Gas Passenger Vehicles: Availability, Cost, and Performance
Contents
Introduction ................................................................................................................................ 1
Current Market ........................................................................................................................... 1
Life-Cycle Cost Issues ................................................................................................................ 1
Other Potential Benefits and Costs .............................................................................................. 2
NGV Conversions ....................................................................................................................... 3
Legislation .................................................................................................................................. 5
Conclusion.................................................................................................................................. 5
Contacts
Author Contact Information ........................................................................................................ 6
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Natural Gas Passenger Vehicles: Availability, Cost, and Performance
Introduction
Congressional and consumer interest in natural gas vehicles (NGVs) for personal transportation
has grown in recent years, especially in response to higher gasoline prices, concerns over the
environmental impact of petroleum consumption for transportation, and policy proposals such as
the “Pickens Plan.”1 Although natural gas passenger vehicles have been available for years, they
have been used mostly in government and private fleets; very few have been purchased and used
by consumers. Larger NGVs—mainly transit buses and delivery trucks—also play a role in the
transportation sector, especially due to various federal, state, and local incentives for their use.
However, high up-front costs for new NGVs, as well as concerns over vehicle performance and
limited fuel infrastructure, have led to only marginal penetration of these vehicles into the
personal transportation market.
Current Market
The Energy Information Administration (EIA) estimates that there were roughly 114,000
compressed natural gas (CNG) vehicles in the United States in 2007, and roughly 3,000 liquefied
natural gas (LNG) vehicles.2 Roughly two-thirds of NGVs are light-duty (i.e., passenger)
vehicles. This compares to roughly 240 million conventional (mostly gasoline) light-duty
vehicles.3 Further, of the roughly 16.1 million new light-duty vehicles sold in 2007, only about
1,100 (0.01%) were NGVs.4 For model year (MY) 2010, only one NGV was available from an
original equipment manufacturer (OEM) for purchase by consumers—the CNG-fueled Honda
Civic GX5—although some companies convert vehicles to CNG before they are sold (usually as
fleet vehicles).
Life-Cycle Cost Issues
Currently, natural gas vehicles are significantly more expensive than comparable conventional
vehicles. For example, the incremental price between a conventional Honda Civic EX and a
natural gas-powered Honda Civic GX is nearly $6,000,6 although some of this difference is made
up through a tax credit for the purchase of new alternative fuel vehicles. If a taxpayer qualifies, he
or she may claim a credit of up to $4,000 for the purchase of a new Honda Civic GX.7 This tax
1 On July 8, 2008, T. Boone Pickens announced a plan calling for reduced petroleum imports through the expanded use
of natural gas in transportation. For an analysis of this plan, see CRS General Distribution Memoradum, The T. Boone
Pickens Energy Plan: A Preliminary Analysis of Implementation Issues, by Jeffrey Logan, William F. Hederman, and
Brent D. Yacobucci.
2 U.S. Energy Information Administration (EIA), Alternatives to Traditional Transportation Fuels 2007, April 2009.
Tables V1 and V4.
3 Stacy C. Davis, Susan W. Diegel, and Robert G. Boundy, Transportation Energy Data Book: Edition 27, 2008.
Tables 4.1 and 4.2.
4 Davis, et al., op. cit. Tables 4.5 and 4.6; EIA, op. cit. Table S1.
5 For MY2004, there were eight CNG models (from Ford, General Motors, and Honda). This number dropped to five in
MY2005, and one in MY2006. U.S. Department of Energy (DOE), Fueleconomy.gov Website. Accessed February, 2,
2010.
6 2010 Honda Civic EX MSRP: $19,455. 2010 Honda Civic GX MSRP: $25,340. $25,340 -$19,455 = $5,885.
7 Energy Policy Act (EPAct) of 2005. P.L. 109-58, Sec. 1341.
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credit is set to terminate at the end of 2010. It should be noted that with higher production, this
incremental cost should decrease, but the likely extent of that decrease is unclear.
Since the number of natural gas refueling stations is limited—only about 400 to 500 publicly
available nationwide,8 compared to roughly 120,000 retail gasoline stations9—the purchaser of a
new NGV might also choose to install a home refueling system. According to Consumer Reports
and Natural Gas Vehicles for America (NGVAmerica), a FuelMaker Phill system costs between
$3,400 and $4,500 plus installation.10 However, a taxpayer can offset $1,000 of this by claiming a
tax credit for installing new alternative fuel refueling infrastructure.11
Offsetting the higher up-front costs are likely annual fuel savings in switching from gasoline to
natural gas. Using recent average retail gasoline and residential natural gas prices, annual fuel
cost savings could be roughly $650.12 Assuming a 7% discount rate, the current payback period
for the CNG vehicle and home refueling system is just over 10 years. Depending on how long a
consumer keeps a new vehicle, this payback period may or may not be acceptable to that
consumer.
Assuming a smaller differential between natural gas and gasoline prices, or the expiration of the
existing tax incentives can significantly increase this payback period; assuming a larger
difference in fuel prices, assuming a smaller discount rate, or assuming incremental natural gas
vehicle prices decrease in the future, this payback period could be shorter.
Other Potential Benefits and Costs
In addition to the life-cycle cost difference between CNG and conventional vehicles, there are
other costs and benefits associated with natural gas vehicles which may not have a defined price
tag. For example, any reduction in petroleum dependence (beyond the per-gallon cost savings) is
not represented in the above payback period estimate. Some consumers may place a value on
displacing petroleum consumption, and thus imports.13 Further, natural gas vehicles in general
8 Roughly half of the 800 to 1,000 natural gas refueling stations are privately owned or are located at government sites
closed to the public (e.g., military bases). Of the public CNG refueling stations, many require a keycard or other prior
arrangement with the station operator.
9 DOE, Alternative Fuels and Advanced Vehicles Data Center (AFDC), Alternative Fueling Station Locator.
http://www.eere.energy.gov/afdc/fuels/stations_locator.html. Accessed September 16, 2008.
10 “The natural-gas alternative: The pros & cons of buying a CNG-powered Honda Civic,” Consumer Reports, April
2008. Stephe Yborra, NGVAmerica, Frequently Asked Questions About Converting Vehicles to Operate on Natural
Gas, Washington, DC. Accessed October 15, 2008. http://www.ngvc.org/pdfs/FAQs_Converting_to_NGVs.pdf.
One potential impediment to this is the fact that in April 2009, FuelMaker declared bankruptcy in Canadian court. In
May, Fuel Systems Solutions, Inc., purchased some of FuelMaker’s assets, including the Phill brand. Reuters, “Key
Developments: Fuel Systems Solutions Inc (FSYS.O),” May 28, 2009, http://www.reuters.com/finance/stocks/
keyDevelopments?symbol=FSYS.O&pn=1.
11 EPAct 2005. P.L. 109-58, Sec. 1342.
12 Savings based on the following assumptions: 15,000 annual miles traveled (both vehicles); 29 miles per gallon (mpg)
fuel economy for gasoline vehicle; 28 mpg equivalent for natural gas vehicle; $2.66 national retail average for regular
gasoline; $11.25 per 1,000 cubic feet of residential natural gas; 121.5 cubic feet of natural gas per gasoline gallon
equivalent. Therefore, current residential natural gas prices are roughly $1.37 per equivalent gallon. Fuel economy
estimates from DOE, Fueleconomy.gov. Fuel price estimates are from EIA.
13 However, it should be noted that a reduction in domestic consumption will likely not lead to a one-to-one reduction
in imports, since reducing domestic consumption is also likely to reduce domestic petroleum production.
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have lower pollutant and greenhouse gas emissions than comparable gasoline vehicles, although
this may or may not be true for specific vehicles and pollutants.14
A key potential benefit raised by proponents of NGVs is that while the United States imports the
majority of the petroleum it uses, most natural gas is domestically produced. Further, domestic
output is higher than once thought, likely due to recent growth in unconventional natural gas
sources (e.g., coal mine methane, shale gas).15
But there are also several potential and measurable drawbacks to natural gas vehicles, many
related to vehicle performance and acceptability. For example, CNG engines tend to generate less
power for the same size engine than gasoline engines. Thus NGVs tend to have slower
acceleration and less power climbing hills.16 Also, because CNG has a lower energy density than
gasoline, CNG vehicles tend to have a shorter range than comparable gasoline vehicles.17 In
addition, for passenger vehicles, the larger natural gas storage tanks often occupy space that
would otherwise be used for cargo—generally in the trunk of a sedan and in the bed of a pickup
truck.18 Again, these considerations may or may not play into a individual purchaser’s decision,
but could affect the overall marketability of the vehicles.
NGV Conversions
A key question raised by those interested in the expansion of natural gas for automobiles is
whether existing vehicles can be converted to operate on natural gas. From a technical feasibility
standpoint, there are few problems with converting a vehicle to operate on natural gas. Most
existing engines can operate on the fuel, and most conversions involve changes to the fuel
system, including a new fuel tank, new fuel lines, and modifications to the vehicle’s electronic
control unit.19
However, converting an existing vehicle is more problematic from a practical standpoint. In the
United States, NGV conversions—or any other fuel conversion—can potentially run afoul of the
Clean Air Act (CAA). All new vehicles (gasoline or otherwise) must pass rigorous tests to prove
they will meet emissions standards over the life of the vehicle. These tests tend to be very
expensive, although the marginal cost spread over a full product run—thousands to hundreds of
thousands of vehicles—is minimal. After a vehicle has been certified by the Environmental
14 DOE, AFDC, Natural Gas Benefits. http://www.eere.energy.gov/afdc/fuels/natural_gas_benefits.html. Accessed
September 16, 2008.
15 It should be noted that high natural gas prices may be needed to sustain some of this output. Otherwise, the United
States may need to import natural gas to meet growing demand.
16 The CNG Honda Civic is rated at 113 horsepower (hp), while the gasoline Civic EX is rated at 140 hp (both have 1.8
liter engines). Cars.com vehicle comparison. http://www.cars.com/go/index.jsp. Accessed September 16, 2008.
17 170 miles for the Civic GX vs. 345 miles for the gasoline Civic. DOE, Fueleconomy.gov Website. Accessed
September 16, 2008.
18 All current natural gas vehicles are modified versions of conventional gasoline vehicles. Presumably, if there were
enough consumer demand, a natural gas vehicle designed from the ground up could address the problem of cargo
capacity.
19 NGV Conversion, Inc., Frequently Asked Questions. Accessed October 10, 2008. http://ngvus.com/p/index.html.
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Protection Agency (EPA), any changes to the exhaust, engine, or fuel systems may be considered
tampering under the CAA. Section 203(a)(3)(A)20 states that it is prohibited
for any person to remove or render inoperative any device or element of design installed on
or in a motor vehicle or motor vehicle engine in compliance with regulations under this title
prior to its sale and delivery to the ultimate purchaser, or for any person knowingly to
remove or render inoperative any such device or element of design after such sale and
delivery to the ultimate purchaser.
EPA generally interprets this to mean that any change to a vehicle’s engine or fuel systems that
leads to higher pollutant emissions constitutes “tampering” under Section 203.
In 1974, EPA issued guidance (“Memorandum 1A”) to automaker and auto parts suppliers on
what constituted tampering in terms of replacement parts under routine maintenance.21 The
guiding principle EPA has used in enforcing the anti-tampering provisions for alternative fuel
conversions is that such changes are allowed as long as the dealer has “reasonable basis” to
believe that emissions from the vehicle will not increase after the conversion. Instead of requiring
all converted vehicles to undergo testing equivalent to new vehicle testing, EPA allowed vehicle
converters flexibility in certifying their emissions.
However, in the 1990s, EPA received data from the National Renewable Energy Lab that many
vehicles converted to run on natural gas or liquified petroleum gas (LPG) and certified under the
flexibility provisions might be exceeding emissions standards.22 Therefore, in 1997 EPA issued an
addendum to Memorandum 1A tightening the testing standards for these conversions. The
original decision required compliance with new testing procedures starting in 1999. Subsequent
revisions extended the deadline thorough March 2002.
Currently, certifying vehicle conversions can be very expensive for small producers, since each
vehicle must be independently certified. For example, a converter must test the emissions of the
conversion of specific “engine families” (e.g., MY2008 4.6L V8 Ford vehicles). Each different
engine/emissions system combination must be tested independently (e.g., MY2009 vehicles, or
vehicles with different engines). Therefore, the production and use of universal “conversion kits”
is effectively prohibited under the EPA enforcement guidance.23 To allow a market for conversion
kits, the CAA would need to be amended to allow for these conversions regardless of vehicle
emissions, or EPA would need to conclude that the conversions do not increase emissions.
NGVAmerica estimates that it can cost as much as $200,000 to design, manufacture, and certify a
conversion for a single engine family.24
Some companies have completed the required testing on a limited number of vehicles, and offer
conversions. NGVAmerica maintains a list of the companies that currently sell NGV conversion
equipment, and the vehicles that have been certified by those companies.25 In addition to the
20 42 U.S.C. 7522(a)(3)(A).
21 EPA, Office of Enforcement and General Counsel, Mobile Source Enforcement Memorandum 1A, June 25, 1974.
22 EPA, Office of Enforcement and Compliance Assistance, Addendum to Mobile Source Enforcement Memorandum
1A, September 4, 1997.
23 To make a conversion kit that would work for all vehicles, a manufacturer would need to certify the emissions of the
conversion on every engine family for all model years—a very expensive proposition.
24 Stephe Yborra, op. cit.
25 NGVAmerica, Guide to Available Natural Gas Vehicles and Engines, Updated November 11, 2009.
(continued...)
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Civic GX produced by Honda, NGVA lists six companies that convert Ford and General Motors
vehicles—mostly light-duty trucks such as pickups and vans. According to EPA requirements,
vehicles must be converted by the original manufacturer of the conversion equipment, or by a
retrofitter trained and qualified by the conversion manufacturer. NGVAmerica estimates that
converting a passenger vehicle can cost over $10,000 (e.g., they estimated $13,500 for a Ford
Crown Victoria), although specific costs would be determined by the manufacturer and/or
retrofitter.26 Conversions would be eligible for the $4,000 alternative fuel vehicle tax credit (see
“Life-Cycle Cost Issues” above).
Some have questioned whether a vehicle conversion would void the original manufacturer’s
warranty. However, only those vehicle systems directly modified by the conversion would raise
warranty concerns. In those cases, the conversion manufacturer’s warranty would warranty the
modified systems. For systems not affected by the conversion (e.g., suspension, climate control),
the original manufacturer’s warranty would still apply.27
Legislation
Several bills have been introduced in the 111th Congress that would promote natural gas vehicles
and NGV infrastructure. Most notably, the New Alternative Transportation to Give Americans
Solutions Act (Nat Gas Act) of 2009 (H.R. 1835 and S. 1408) would provide a wide range of
incentives. The Nat Gas Act would significantly expand tax credits for the purchase of NGVs and
for the installation of natural gas refueling infrastructure, and extend those credits through 2017
(they are set to expire at the end of 2010). The bill would also provide a tax credit to automakers
who produce NGVs, and would authorize grants to those automakers to develop natural gas
engines. Finally, the bill would require that 50% of vehicles purchased by federal agencies be
NGVs. As of February 2010, both the House and Senate versions of the bill had been referred to
committee.
Several other bills would also provide additional tax incentives or government mandates for the
purchase of alternative fuel vehicles, including NGVs. Other than the American Clean Energy
and Security Act (ACES; H.R. 2454), the House energy and climate change bill, none of these
bills has been reported out of committee. ACES would provide many incentives for the use of
natural gas over other, more carbon-intensive fuels (i.e., coal and petroleum). ACES would also
require a study by EPA on the potential for NGVs to reduce greenhouse gas emissions and criteria
pollutants under the CAA.
Conclusion
Higher gasoline prices and concerns about U.S. oil dependence have raised interest in NGVs.
Energy policy proposals such as the Pickens Plan have further raised interest in these vehicles.
However, currently the number of new passenger vehicles capable of operating on natural gas is
(...continued)
http://www.ngvc.org/pdfs/marketplace/MP.Analyses.NGVs-a.pdf.
26 Stephe Yborra, op. cit.
27 Ibid.
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relatively low, and there are limited opportunities for converting existing gasoline vehicles to run
on natural gas.
The market for natural gas vehicles will likely remain limited unless the differential between
natural gas and gasoline prices remains high in order to offset the higher purchase price for a
natural gas vehicle. Conversions of existing vehicles will also continue to be restricted unless the
CAA is amended or if EPA makes changes to its enforcement of the CAA.
Author Contact Information
Brent D. Yacobucci
Specialist in Energy and Environmental Policy
byacobucci@crs.loc.gov, 7-9662
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