AT&T to Make Massive Natural Gas Vehicle Purchase

attlogoUpdated: The former oil baron T. Boone Pickens was so giddy about AT&T’s plan, announced this morning, to make one of the largest purchases of compressed natural gas vehicles in the U.S. to date, that he tweeted about it. AT&T said it will spend $565 million over a decade purchasing 15,000 alternative fuel vehicles, including spending $350 million on 8,000 compressed natural gas vehicles. While AT&T said it has found in trials that “a mix of solutions is right for its fleet,” its commitment to natural gas vehicles is a very significant step for a technology that has been slow moving.

If you recall, T. Boones Picken’s Plan includes converting trucks and company fleets in the U.S. that burn diesel and gas to run on compressed natural gas. (His original plan also included building a massive wind farm in Texas, but the credit markets have stalled that idea for now.) Pickens has estimated that it will cost $28 billion to convert 350,000 trucks from diesel to natural gas, which he says could create about 450,000 jobs and reduce oil imports by 5.14 percent. But it will be companies like AT&T — which has thousands of vehicles in its fleet and has to pay for upgrades anyway — that will make the choice to buy natural gas vehicles in the U.S.

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For AT&T, the purchase is smart economics. AT&T can replace its aging fleet over a decade with alternative-fuel vehicles, and depending on which technologies it uses, it could get up to a 39 percent improvement in fuel economy and reduce greenhouse gas emissions by up to 29 percent, according to AT&T. So the largest phone company in the U.S. can save significantly on gas prices, which are predicted to rise over the coming months from their current lows. It can also show its green credentials and likely tap into some of the incentives for green vehicles in the stimulus package.

Natural gas vehicles are not without drawbacks, however. The trade group Natural Gas Vehicles for America (NGVA) says that natural gas vehicles produce around 20 percent less greenhouse gas emissions than a standard gas vehicle, which is about the same as corn-based ethanol — not bad, but not great. Pickens has admitted that natural gas vehicles are a transition to more advanced technology, like electric vehicles, but investing in a technology that makes less substantial carbon reductions now could take away investment from future technology that could reduce carbon emissions further.

There’s also the natural gas infrastructure bottleneck. The NGVA says there are more than 1,100 stations in the U.S. On that note, AT&T says it will work with developers to build 40 new compressed natural gas fueling stations throughout its territory. Oh yeah, did we mention that Pickens is a major shareholder in Clean Energy Fuels, which makes money off of building compressed natural gas fueling infrastructure? (CLNE’s stock is up almost 2 percent in morning trading).

It’s also unclear what company is going to sell the CNG vehicles to AT&T. AT&T didn’t name a supplier, and said “the vehicle chassis will be built domestically by a U.S. automotive manufacturer. AT&T will then work with domestic suppliers to convert the chassis to run on CNG.” (Update: The WSJ reports Ford will be an initial vendor for the CNG chasis, and AT&T confirmed with us.) Realistically there are not that many contenders for CNG vehicles yet: Honda has a $25,000 CNG passenger vehicle, and Pickens and Clean Energy Fuels are working with the investors at Perseus to spend $160 million developing a natural gas vehicle.

Yeah, Pickens has financial interests throughout the entire equation. And he is encouraging more companies like AT&T to convert to CNG — he said this morning:

AT&T’s decision today to upgrade 8,000 of its fleet vehicles to run on natural gas is a demonstration of real American corporate leadership that will be good for their bottom line, the environment and the country. AT&T recognizes that our reliance on foreign oil is one of the greatest threats to our national security—hopefully others will follow their lead.

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