A Diesel Alternative

After spending many years in the beer wholesaling business, Eddie Murray decided a decade ago to “take a leap of faith,” as he puts it, and get into the natural gas business. He’s currently the Director of Business Development for Houston-based Freedom CNG, which owns and operates compressed natural gas stations used for fleet trucks.

I recently spoke to Murray about his early career, the jump into fuel and what advice he has for wholesalers who want to switch to alternative energy sources to be more sustainable and save money.

Beverage Wholesaler: Your area of the country recently survived Hurricane Harvey. What’s been the impact on the company and on fuel costs locally?

Eddie Murray: What we in the industry talk about all the time is happening right now, with the shortage of diesel and gasoline, which is sending prices spiking. The diesel shortage won’t be permanent, but the price of national gas has been stable for 16 years. The movement has been within the same 12 cent range for years, which means we haven’t changed the price at the pump in all that time.

BW: How did you get into the natural gas industry in the first place?

EM: I was in the beer business for a long time, starting in 1978 in New York City. I worked for Manhattan Beer for a few years, then went to the Guinness Import Company, worked on Mexican beer accounts on the west coast, and ended up at Boulevard Brewing in Kansas City for a few years. One day I decided to try something totally different, so I got into this industry on the marketing and brand development side. I still have a lot of guys I know at beer distributors, and I keep telling them if they diversify their fleet they can save a lot of money.

BW: How did Freedom CNG get started?

EM: We’re owned by a wood recycling company called Novus, and back in 2008 when diesel fuel was spiking the price went up to $4.55 per gallon in Houston. The company has contracts to remove debris from several cities into our landfill, so our ownership wanted to see if our trucks could run on an alternative fuel to save money. We looked around and found that compressed natural gas is really user-friendly. We found some state and city grants to help defray the cost and found that we could get 40-65% of the value of a new truck if we destroyed our old diesel-burning vehicles. The reimbursements were all based on carbon and exhaust output of the old vehicles versus the new ones.

At that time, there were only three CNG stations in Houston. We realized that all our trucks come back to the shop everyday to gas up at night, so we built our own station right next to the recycling center. Today nearly 50% of new trucks in the trash industry run on CNG, because the industry has found it’s great for their application. They go out through the neighborhood and come back at the end of the night, just like a beer distributor.

We built the station, then asked a few local trash companies to partner up to give us volume buying power so the business model would work. That was in 2011. In 2012 one of the executives from Houston Distributing drove by and saw our station and stopped to talk about it. We ended up going into a partnership and building them a station next to their warehouse. Along the way we also got involved in Houston Metro, which runs all the city buses, and built a station near one of their depots. Then we built a fourth station in Midland in partnership with Schlumberger, the largest oil field servicing company in the world. And we have four more stations on deck to be built.

We find the best applications are in food and beverage distribution, trash removal, or delivery companies. The great thing is all our stations are public, not behind the fence, so our partners benefit when third parties use the stations.

BW: What’s the biggest incentive for distributors to switch some of their vehicles away from diesel toward alternative fuels?

EM: Almost every state that has oil and gas production has some type of state grant or tax incentive for alternative fuels. If a beer distributor purchases a new truck today, it has an additional filter system on it, not just the catalytic converter. It’s called a Diesel Emission Fluid system, which treats the exhaust. That filter adds about 25 cents per diesel gallon to operate for delivery companies that stay local. And because the filters tend to clog in trucks that don’t get up to highway speeds for long distances, it also adds 5-6 cents per mile in maintenance costs.

BW: What’s the cost difference for a new diesel truck versus a CNG truck?

EM: Between $32,000 and $42,000. Today the fuel cost for CNG is $1.80 to $2.10 per gallon, which has been the same price forever. So there’s a payback period, but grants typically cover more than the additional cost for the truck. The system itself to run CNG is inexpensive, but the tanks are cylinders that can be pricey.

I always tell people you never want to convert an existing truck – always buy a new truck outfitted for CNG so you get its full lifetime to realize the savings. If you’re in a state with grants, you can apply for them today and usually have 18 to 24 months to exercise the option, so there’s plenty of time to plan deployments.

Everyone wants to be sustainable, but they also want to be financially sustainable. The good news is that it costs less to operate overall, and it’s the fuel of the future for sure.

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