Fedex Weighs Natural Gas Benefits

Nov 12, 2012 9:00 AM ET

By Andy Ashby, Staff writer- Memphis Business Journal

FedEx Freight Inc. has added natural gas engines to its search for gasoline alternatives, but whether the experiment proves to be economically viable remains to be seen.

The business unit of FedEx Corp. is beta testing two new tractors powered by liquefied natural gas-only engines, hoping for a limited release in 2013.

FedEx is using Kenworth tractors with Cummins Westport Inc. engines.

The tractors will be used as part of the carrier's regular line haul operations and are expected to log nearly 1,000 miles per day, allowing FedEx to see if the engines will meet the company's day-to-day operational needs. One tractor is running back and forth twice daily from FedEx's service center in Irving, Texas, to its service center in Muskogee, Okla. The other makes one run to Muskogee and back, and then a run to Prescott, Ark., and back.

FedEx's interest in natural gas engines is derived from natural gas being cheaper than diesel and the growing infrastructure the company is starting to see along long-haul corridors, according to Mitch Jackson, staff vice president of environmental affairs and sustainability.

"It's diversifying and finding new sources of energy and fuel for transportation," Jackson says.

Transportation in the United States is more than 90 percent reliant on petroleum, according to Jackson.

"From an industry security standpoint, we need to diversify much as we have in the power generation sector," he says.

FedEx has a vehicle strategy it calls the "reduce, replace and revolutionize" program. The company tries to reduce the number of miles it drives and the number of vehicles it needs to drive them through routing efficiency and other ways. It also tries to replace older vehicles with the most efficient vehicles for each application. Finally, the company looks to find new or evolving technologies, such as natural gas, which can reduce its emissions and be economically viable. It's also looking at hybrid electric and all-electric vehicles.

Other efforts include tests with emission-free hydrogen fuel cell-powered and electric forklifts for dock operations, equipping all new vehicles with tires that help improve fuel mileage and fitting trailers with trailer skirts to improve aerodynamics and fuel consumption.

As of Oct. 22, a gallon of diesel cost $4.12 while liquefied natural gas cost $2.92 per diesel gallon equivalent, according to FedEx. The cost factor prompted FedEx Freight, which has 14,000 trucks in its fleet, to explore it. However, one challenge is the cost of vehicles. It can cost $40,000 to upgrade a truck to natural gas.

"Historically, natural gas vehicles have cost quite a bit more than conventionally-fueled vehicles, so manufacturers would have to scale up and produce these vehicles in a cost-competitive fashion," Jackson says.

Also, the infrastructure is pretty sparse as far as natural gas fueling stations, something which helped determine FedEx's test route for its two natural gas tractors. FedEx currently is filling its trucks up at retail gas stations that are equipped to fill up natural gas engines, but expects retail locations to increase.

"It's not just about the price of the fuel itself, it's also about where can you fuel," Jackson says. "We shouldn't have to put the fueling infrastructure in our own facilities. We'd like to take advantage of retail truck fueling. We're going to find out how these new engines perform so we can see what level of potential solution they can provide to us and others."

Compressed natural gas refueling plants start at about $400,000; a high-speed plant costs more than $1 million.

While natural gas for trucks is new and novel, Jim Boncosky, sales manager with Diamond Cos. Inc., isn't sure it will overtake diesel engines anytime soon.

"We didn't get diesel fuel by accident," Boncosky says. "Diesel still provides the most bang for the buck."

Natural gas might make more sense for a less-than-truckload company like Fed-Ex Freight, as it deals with lighter loads.

"A load of FedEx going from here to Denver may get to 50,000 pounds, truck and load," Boncosky says. "That's 30,000 pounds under a maximum shipping weight for a truckload in the United States. It's more in Canada."

Companies began looking at other sources outside of diesel because of cost.

"If diesel fuel went below $3 a gallon, you would not hear anybody making any rumblings toward liquefied natural gas and compressed natural gas," he says.

Compressed natural gas engines could see some applications in municipal-based trucks and buses since those don't rely on fueling stations along the highway.

"They're home every night and can get fuel every night," Boncosky says.

But Diamond has seen a limited market for the technology: It recently sold 30 natural gas trucks to Kansas City, working with a Dallas-based company that recently went out of business. The company is looking to work with another company, possibly Cummins Inc., on getting natural gas trucks for customers who request them.

FedEx has also been working on hybrid electric vehicles in small- and medium-duty vehicles. The company now has 364 hybrid electric vehicles in service and recently purchased 130 all-electric vehicles.

By May, the company's FedEx Express unit will have more than 11,000 clean diesel vehicles, which account for more than 35 percent of its fleet.

In 2008, the company set a goal for FedEx Express' fleet to see a 20 percent improvement in fuel efficiency by 2020. In fiscal 2011, the company was already at 16.6 percent. FedEx has saved more than 75 million gallons of fuel since 2008, according to Jackson.

FedEx Freight Inc. Less-than-truckload freight services HQ: Memphis Established: 2001 President: William J. Logue FY 2012 revenue: $5.3 billion Employees: 32,000 Phone: (901) 818-7500 Website: