Despite the uncertainty created by low oil prices, Colorado is pushing ahead in 2015 with efforts to expand the use of compressed natural gas (CNG) as a transportation fuel.  Earlier this month, the Colorado Energy Office (CEO) closed the second round of applications under the ALT Fuels Colorado grant program.

ALT Fuels Colorado is a state program designed to advance the adoption of alternative fuel vehicles, such as natural gas-fueled vehicles (NGV), by providing grants to partially fund the development of CNG fueling infrastructure, as well as electric vehicle (EV) charging and liquefied petroleum gas (LPG) station facilities.  Between 2014 and 2017, ALT Fuels Colorado will distribute $30 million from the Federal Highway Administration’s Congestion Mitigation and Air Quality program, with half of that amount distributed by CEO for investments in alternative fueling infrastructure and half distributed by the Regional Air Quality Council for purchases of alternative fuel vehicles.

In Round One of the ALT Fuels Colorado program, grants were made for eight CNG fueling stations located primarily along the Interstate 25 corridor spanning Colorado’s Front Range from Loveland to Trinidad.  Three of the grants were awarded to Fort Collins, Colorado-based Ward Alternative Energy which operates three CNG stations in Weld County, Colorado and has several other stations in the planning and permitting stages.

In Round Two of the program, CEO anticipates distributing another $3 million with up to $500,000, or up to 80% of the equipment cost, being awarded to each successful applicant.  Applicants planning to offer EV and LPG capabilities as well as CNG fueling may be eligible for up to an additional $100,000 grant.  The proposed CNG fueling facilities are intended to meet the needs of both the traveling public as well as NGV fleet operators so as to advance the goal of creating a statewide system of publicly accessible CNG and other alternative fuel infrastructure along the state’s major transportation corridors.  Interest in the ALT Fuels Colorado program has been substantial with nearly a dozen alternative fuel companies participating in the Round Two Pre-Bid meeting.  Round Two funding decisions are expected to be announced in March, 2015.

Round Two of the ALT Fuels Colorado program coincides with several other CNG developments around the state.  4CNG, LLC, a partnership between Sapp Bros, Inc. and Stirk CNG, expects to open by late-spring a CNG fueling facility in Commerce City, Colorado which is partially funded from Round One of the ALT Fuels Colorado program.  Sparq and Acorn Petroleum are working with Pueblo County to explore the development of a CNG fueling station that may serve county-owned CNG vehicles.  Garfield County increased its 2015 funding to the Garfield Clean Energy Collaborative with a portion of the funds intended to continue support for the West Slope CNG Network, an initiative to develop a network of CNG fueling stations throughout western Colorado.

Colorado’s latest steps come amid a mix of “good news” and “bad news” for the CNG and NGV sector.

On the “good news” front, governmental air quality initiatives and growing public interest in environmentally friendly transportation alternatives continue to fuel interest in CNG and NGVs as a transportation option.  In December, 2014, President Obama signed into law legislation that would retroactively extend through the end of 2014 the alternative fuel excise tax credit that expired at the end of 2013, as well as separate legislation modifying the Corporate Average Fuel Economy (CAFE) program to lower the limit on CAFE credits auto manufacturers can earn by producing bi-fuel NGVs.  Automakers are responding to these various developments by increasing the number of CNG models available for purchase.

On the “bad news” front, however, concerns related to the higher initial costs of NGVs, the cost of converting gasoline-fueled vehicles to CNG, and the perceived scarcity of fueling infrastructure continue to hamper the growth of CNG as a transportation option.  Additionally, low oil prices have some potential NGV adopters delaying or reconsidering their decisions.

Despite this mixed bag of realities and perceptions, market studies in late-2014 and early-2015 present an optimistic outlook for the CNG/NGV sector.  Various estimates project the global market for CNG as a transportation fuel will exceed $125 billion by 2020, and the international market for NGVs will exceed 4 million vehicles annually by 2024.  Although large vehicles will continue to represent a major portion of the NGV sector, the market for light duty NGVs is expected to continue the growth seen in recent years.  While lower oil prices have changed the current economic analysis, CNG still offers savings opportunities as compared to current gasoline and diesel prices.  As a result, fleet operators of medium and heavy duty trucks appear to be taking a long-term view that anticipates gasoline and diesel prices will rebound from current levels.

With the continuation of the ALT Fuels Colorado program, Colorado joins other states spanning the country from Pennsylvania to California and Florida to North Dakota that are deploying a variety of incentives, grants, subsidies, and public-private partnerships to promote the expanded use of CNG and NGVs.  Additional rounds of funding through the ALT Fuels Colorado program are expected in the future.