Pensacola, Florida
Monday September 15th 2014

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Pensacola’s Gas Game

By Jeremy Morrison

A few months after arriving in office, Pensacola Mayor Ashton Hayward got a new car. It’s cute.

The car’s a Honda Civic GX. In June, Hayward invited folks down to City Hall to take a gander. Aesthetically speaking, the car’s more responsible than fun; it’s a Honda, not a DeLorean.

The Mayor is exceedingly jazzed about the new car. That’s because the new car isn’t a car. The Honda is the future.

Purchased this spring, Hayward’s Honda represents one of the Mayor’s visions for Pensacola. The car is the first compressed-natural gas (CNG) vehicle the city has bought.

“Natural gas is cheaper, it’s cleaner and better for the environment, and owning a natural gas utility like ESP makes it a pretty convenient vehicle to fill up,” Hayward said in a statement at the time he purchased the vehicle.

The Honda serves as a tangible announcement that the Mayor aims to cast Pensacola on the natural gas stage. More recently, it was announced that the city will partner with Emerald Coast Utilities Authority in switching some of each entity’s fleet of vehicles to natural gas.

But natural gas vehicles are just the tip of Hayward’s vision. The city is close to inking a deal on a CNG fueling station, with plans to construct two more once the initial facility is complete. The move could provide Pensacola with a strategically significant foothold in the nation’s race into energy’s next wild frontier.

“That’s what I really want to be, is a player,” Hayward said, a couple of weeks after announcing the ambitions.

THE GAME

Don Suarez stepped out of the natural gas conference and took the phone call. He spoke softly so as not to disturb his industry cohorts in the conference hall, but excitement escaped even through his whisper.

“Natural gas is plentiful in the United States of America,” Suarez said into the phone. “We can likely supply 100 percent of our needs.”

Suarez is the director of Energy Services of Pensacola, the local city-owned natural gas provider. He talks like a man riding the wave of the Next Big Thing. Excited exclamation marks are everywhere.

“Frankly, natural gas is almost everywhere!” Suarez said, referencing an industry map detailing the country’s deposits of the resource. “This map shows where shale fields are and they’re almost everywhere.”

Indeed, it must be a thrilling cowboy-era in the natural gas industry. With oil proving to be an increasingly unstable commodity, the energy industry is focusing more and more on natural gas. It looks to be the next rung in the fossil fuel ladder.

But fossil fuel carries a lot of baggage. Folks in the natural gas industry prefer to look at their product as an endless supply of eco-friendly happy gas.

“Yes, it is finite in that it is a fossil fuel—and growing, thanks to shale gas, which is a relatively new phenomenon,” Suarez said.

Although it is a fossil fuel, natural gas is packaged in a bright green bow. It is pitched as a bridge fuel that responsible adults can entertain while waiting for the improbable utopia of renewable energies to descend from the clouds.

That’s where Hayward is coming from. He sees jumping into the natural gas arena as a responsible, green move.

“Getting off oil is a pretty big deal,” the Mayor said. “It’s the right thing to do.”

Immediate economics also play a role. While oil prices are expected to continue their climb as supply diminishes and production costs go up, natural gas prices are currently more stable, and lower.

“It’s clean,” Hayward said. “It’s obviously a hell of a lot less expensive.”

In under a decade, the plan is to switch an as-yet-to-be-determined number of ECUA vehicles to natural gas, in addition to a yet-to-be-determined number of city vehicles. The new natural gas vehicles will enter rotation as older diesel models are replaced.
Currently, the Honda Civic is the city’s only natural gas vehicle. The car is used by ESP, and serves as a PR tool heralding the coming natural gas revolution.

Over at the city’s sanitation department, Doug Resmondo is the go-to guy for Pensacola’s big switch. He’s been studying the landscape of natural gas vehicles and is helping to lead Pensacola into its green future.

“The NG certainly has wonderful applications for fleets,” said Resmondo, assistant director of the city’s sanitation department.

He explained that the city and ECUA would be focusing on larger, fleet vehicles. The Honda Civic is adorable, but more or less a novelty.

“You need to be burning a lot of fuel in a localized area. If you’re not burning a lot of fuel you’re payback’s 20 years—well, that’s probably not a good application,” Resmondo said. “If you weren’t burning 8,000 gallons of fuel a year it’s probably not a place we ought to explore.”

In addition to not having a good enough pay-off, passenger cars are somewhat limited. Currently, the Civic is the only model being produced in any quantity. Logistics also play a role in limiting smaller autos from being applicable.

Compressed natural gas requires a pressurized fuel tank. The tanks are spherical and considerably larger than a traditional gas tank.

“All the tanks are spherical, it holds the most pressure,” Resmondo explained. “You know square tanks aren’t going to work.”

The size and shape requirements essentially eliminate the concept working for, say, a city police cruiser; the tank would eliminate all the trunk space.

“You basically have room for a couple of duffle bags and a brief case in the back,” Resmondo said.

So, instead of sedans, the city will be focusing on transitioning its larger—traditionally diesel-run—fleets. Resmondo calls the switch a “no-brainer.”

“For busses and trucks—big equipment—it’s pretty readily available,” Resmondo said. “Garbage trucks are a very good application for a CNG because they do burn a lot of fuel.”

When a diesel-run garbage truck is replaced with a natural-gas powered truck, the vehicle will be emitting considerably less carbon dioxide. The CNG engines are also quieter and require less mechanical upkeep.

When ECUA changes 10 to 15 of their heavy-duty trucks to natural gas, the city expects to see the utilities company save an estimated $250,000 annually on maintenance fees, in addition to about $1 million savings in fuel costs.

“We’re pretty excited about it,” said Nathalie Bowers, spokesperson for ECUA. “It’s going to be an extremely good move financially, mechanically and all the way around.”
In Tallahassee, the Leon County School District has already waded into the natural gas waters. The district began phasing in NGV school busses three years ago. Currently, the district has about 14 natural gas busses, with 30 more on the way. As the old diesel models finish out their lives, they’ll be replaced with their natural gas counterparts.

“It’s working out great,” said Manny Joanos, divisional director for Leon County Schools.

Joanos oversaw the District’s natural gas introduction. In addition to changing out its bus fleet, the school district has also invested in fueling infrastructure.

“We’re not sticking our toe in the water. We’re in this,” Joanos assured. “Like they say in Vegas—we’re all in.”

Leon County School District officials already feel the move is paying off. While a CNG school bus costs on average about $27,000 more than a traditional model, Joanos reported that the District gets that money back within five years due to savings on upkeep and fuel; the typical life of a school bus is around 15 years.

“We think already we are seeing a reduction on our maintenance costs,” he said, adding fuel savings were also encouraging. “We’re saving a buck and a half, buck seventy-five, depending on what diesel is this week or next week.”

The downside? Natural gas vehicles need a place to fill up and fueling infrastructure ain’t cheap.

“Yeah, the start up is a little more than it would be for something else,” Joanos said.

Fueling infrastructure is integral to Pensacola’s plan. The current set up’s not going to cut it. While the city does have one slow-fill fueling station, it takes between six to eight hours to fill up that Honda Civic.

“That system would fill your car, but it’d take all night long,” Resmondo said.

Resmondo explained that there are two types of CNG fueling stations: slow ones and fast ones. The slow ones—or time filled—simply allow the natural gas (which, unlike gasoline, is not in liquid form) to seep into the tank. A fast-fill station uses a compressor to pump the fuel into the vehicle and takes about the same amount of time as a conventional gas pump to fill a tank.

“Much, much more expensive,” Resmondo said of the fast fill set up.

Pensacola is about ready to sign off on a contract with Zeit Energy for the construction of the first of its three planned stations. The first station—to be located at 3050 Godwin Ln., on ECUA property—is expected to cost $1,431,618.

While the other two facilities’ costs are not yet known, the entire project is suppose to run about $4.8 million. The money will come out of ESP’s budget.

But Pensacola isn’t looking at spending nearly $5 million to fill up a nominal number of city and ECUA fleet vehicles. That’s short-sighted.

“The long range is what I’m really focused on,” Hayward said.

Unlike most municipalities, Pensacola has a vested interest in natural gas. It owns ESP, the local natural gas company that supplies residential and commercial costumers. In that sense, exploring the natural gas arena makes sense.

“We need to be a leader in this. We need to figure out how to grow our enterprise,” Hayward said. “— get out in front of it, honestly.”

As new extraction methods have opened up previously unrealistic reserves of home-grown natural gas, momentum has built swiftly. The industry has taken on an air of new-age wildcatters, with grins as big as their dreams.

“You’re being inundated,” said Joanos, alluding to the barrage of advertisements preaching the gospel of natural gas, “Let me tell you why.”

Joanos described a domestic fuel source with “huge reserves.” He sees an industry ready to explode, an industry that views natural gas vehicles as the next natural marketplace.

“In the last five years, with this new discovery on how to move it and the new discovery of reserves they are predicting huge reserves,” Joanos said.

This landscape is not lost on Mayor Hayward. He’s given quite a bit of thought to the matter, and believes Pensacola is well positioned to take advantage of the predicted boom.

“I really looked at it as an opportunity for us when I got in office,” the Mayor said.

If things go according to plan, natural gas will come into its own and become widely used in heavy-duty, fleet vehicles. At that point, with a trio of fueling stations in place, Pensacola would be primed to provide fuel to any number of customers.

Hayward throws out a few commercial possibilities: Coke, Pepsi, Lewis Bear. Natural gas was at the forefront of his mind when wooing UPS—another potential customer—to the area.

“You could run the gamut,” he said, describing a future in which Pensacola plays the role of fueling hub. “Where we’re geographically located on I-10 is spectacular.”

Hayward is making an educated bet that natural gas is the future. If he’s right, Pensacola may be heading into the next frontier.

What if he’s wrong? What if the country’s massive fleet of commercial vehicles don’t belly up to the natural gas bar?

“If they don’t, somebody’s gonna loose a lot of money,” Suarez said.

PLAYED?

If the oil industry has taken on the persona of a mean-spirited greed goon, the natural gas industry likes to think of itself as an even-keeled peacemaker. It’s not the goofy daydream of solar or wind or hydro. It’s what the serious grown-ups are discussing.

The barrage of industry ads alluded to by Joanos are soft-focused and syrupy-sweet. The only downside, one might think, is the initial cost investment on infrastructure.

“If you spill it, it goes up,” Suarez said, noting how the product is less messy than traditional fuels.

But natural gas is not exactly the lovely, fluffy, feel-good fuel it purports to be.

“Have you heard of the movie “Gasland” by any chance?” said Amy Mall, senior policy analyst with Natural Resource Defense Council. “There are folks whose drinking water has been contaminated.”

Watching people light their tap water on fire—the main take-away from the documentary—is a bit unsettling. The image has become a poster child for the downside of natural gas.

But that’s on the production side. Pensacola’s ventures—via ESP—are on the supply side. It’s much greener on that side, right?

Turns out, maybe not. There isn’t much information on the issue, but some studies currently emerging point to the possibility that—from start to finish, from production to end-use—natural gas might be a net loss for the environment when compared to traditional energy bogey men like oil and coal.

“We expect the production to be dirtier,” Mall said.

The primary environmental argument behind natural gas—the decrease in carbon dioxide output— is also somewhat fuzzy. While natural gas vehicles do emit considerably less CO2, they instead emit a good amount of methane. Ton for ton, methane is considered to be more harmful to the environment due to its ability to trap more heat in the atmosphere than carbon.

But such an intricate, mathematical argument is pretty difficult to grasp in a sound bite. A flame-throwing kitchen sink grabs people’s attention much faster.

The main reason the natural gas industry is primed to shoot for the stars—and the cause of the firewater—is the recent developments in drilling technologies. A method known as hydraulic fracturing—or fracking—has opened up previously unreachable reserves and led to speculation about the possible sea of gas the United States must be sitting on; supply estimates range from 100 years to as far into the future as the mind’s eye can see.

This new extraction method involves drilling a well, then pumping high volumes of highly pressurized water and a chemical cocktail into the Earth. The pressurized liquid separates the sediment and forces natural gas back up the line to the well.
This process works great, until the ground water gets contaminated and lights on fire. Folks tend to freak out about that.

In addition to the visually startling flammable tap, natural gas production also carries risks normally associated with any energy production: pollution, stemming from leaks, and the possibility of an accident (think blowout, but with natural gas instead of oil).

“It’s a long list of issues, it’s a complex industry,” Mall said.

Because the natural gas industry has not been as active as the oil and coal industry, it is apparently not yet held to hazardous waste regulations.

“We’re very concerned about that,” Mall said. “People are concerned about their water. They’re concerned about their air. They’re concerned about the waste.”

The NRDC analyst said that the industry could tighten up the process to ensure that it was as safe and clean as possible.

“It could clean up its act. It has options,” she said, adding that industries don’t usually voluntarily do the right thing. “—only if government forces them to.”

Mayor Hayward’s heard of “Gaslands.” But like the natural gas industry, he brushes fringe fears aside as pesky thorns in an otherwise glorious saddle.

“I think they can figure out the right way,” Hayward said.

While fracking is the main driving force behind the rise of natural gas’ popularity, the method isn’t entirely locally relevant. Suarez said that ESP does not get its natural gas supply from hydraulic fracturing operations. It comes from wells out in the Gulf of Mexico — “up and down the coast, all the way to Texas.”

And the city-owned company doesn’t get into the production side of things. It’s a provider. It contracts with BP to supply the product.

“I know that’s a sensitive company and name with local folks,” Suarez said, explaining that ESP renewed the British company’s contract in the wake of the 2010 oil spill  “—they won the bid.”

The Gulf of Mexico has many natural gas drilling operations. But none off of Florida’s coast, as the state has banned the practice and there is a federal moratorium on oil and gas drilling in most of the eastern gulf—this is due in large part to concerns voiced by tourism and military interests in the area.

Throughout the past few decades, a number of exploratory wells have been drilled in both state and federal gulf waters off of Florida. Some of these natural gas operations look paydirt promising.

Particularly close to home, the Destin Dome blocks are something of an industry centerfold: sensual and completely unattainable. The blocks, along with other state tracts, were leased by various companies. Because both the state and federal governments implemented rules making the operations a no-go, much of the available leases were bought back through litigation. Murphy Oil, however, still holds leases on Destin Dome, blocks 56 and 57, located about 25 miles south of Pensacola.

Over the years, both state and federal lawmakers have made some noise about opening up Florida’s waters to drilling operations. So far, the area’s military presence—which uses that portion of the gulf for training exercises—have been successful in holding such operations at bay.

Just before the 2010 oil spill, President Barack Obama was set to open much of the eastern gulf to drilling. This would not have included the Destin Dome sites, which are protected through 2022. Murphy Oil, however, will be allowed to submit plans for those blocks as early as 2012.

If Pensacola jumps with both feet into the natural gas game, it’s probably a safe bet that ESP will seek out the most bang for its buck. Ten years down the road, in our race into fossil fuel’s new frontier, how close to home will the finish line be?