Propane autogas engine technology is at a high point, which is good news for work truck fleet operators seeking to dramatically reduce both emissions and cost and meet sustainability goals. But that’s just some of the equation; it’s important to understand as much as you can about propane autogas—the fuel itself and the all-important question of the cost of the fuel. At the heart of that question are pricing contracts negotiated with a propane provider.
PROPANE BASICS
Let’s start with the basics. Propane, sometimes known as liquefied petroleum gas or LPG, is a gas normally compressed and stored as a liquid. It is nontoxic, colorless, and virtually odorless; an identifying odor is added so it can be detected. Propane is used for many on-road applications, including transit shuttles, school buses, and Class 4-7 work trucks. When it’s used as a transportation fuel, it is referred to as propane autogas.
Propane is primarily a byproduct of domestic natural gas processing, though some propane is produced from crude oil refinement. US propane supplies are abundant due in large part to increased supplies of natural gas, which is one of the many reasons it makes so much sense for work truck fleets.
The actual amount of propane used by work truck fleets varies greatly. For example, if you’re a municipal fleet operating in a defined area of a city or town, you may use about 200 gallons per month per truck. If you’re a US Postal Service contractor that operates regionally, you may use 1,100 or more gallons per month per truck.
FUEL PRICING CONTRACTS
There are a number of important factors to consider before and during the contract negotiation process. A propane fuel provider will review factors including: your number of fleet vehicles; fueling infrastructure specifics such as location; and actual site costs, like electrical and concrete work.
Propane autogas contracts usually run from three to five years. The key is to negotiate a multi-year propane autogas pricing contract that “locks in” the per-gallon cost over the length of the contract. This is advantageous because the per-gallon cost won’t fluctuate based on factors like supply or geopolitics. Your fuel price will stay the same, making it easier to budget long term.
Propane autogas is cost effective without the necessity of grants or incentives to create a return on investment. In other words, the relative pricing of propane autogas compared with gasoline, diesel, or other alternative fuels makes the investment easy to both quantify and justify.
INFRASTRUCTURE
There are three types of fueling available. First is through public propane stations, where your vehicles refill just like at a gasoline station. There are over 1,000 publicly accessible propane stations in the United States. A second way is mobile fueling, where a propane supplier brings a “bobtail” fueling vehicle to your site to fuel your vehicles. The third and most common way is by erecting an onsite station on your property. The station will include a propane tank that can range in size from 1,000 to 30,000 gallons and fueling dispensers, which are almost identical to gasoline or diesel dispensers in ease of use and refill speed. Some dispensers even have a built-in touchscreen and video monitor with a tutorial if a fleet driver needs assistance.
By and large, most work truck fleet operators elect to install onsite fueling infrastructure; propane providers estimate more than 90% of fleets with propane vehicles choose this option. Propane providers prefer to provide the infrastructure because they can manage the ongoing maintenance, a value-add for the fleet operator. And you get the benefit of their industry expertise in managing costs.
CONTRACT & COST
Of all the transportation fuel sources (including diesel, gasoline, electric, natural gas, etc.), propane stations are the least expensive to install. A propane provider will install a fuel station on a fleet operator’s property for low cost, often even zero cost. But, negotiating the out-of-pocket cost of the station goes hand-in-hand with negotiating your propane per-gallon fuel cost. Be sure to also clearly work through any additional out-of-pocket expenses, like electrical panel upgrades and concrete, ahead of time.
For a propane provider, annual gallons purchased are its main concern, which is predicated on the number of vehicles in your fleet and how and where they are used. If you plan to expand the number of propane autogas vehicles during the contract period, the propane provider can use anticipated gallons as a lever for better pricing on the front end of your contract.
Other questions to ask: Is there an onsite fuel management system currently in place, or does that need to be added? If not, will the fleet add its own management system or will the propane provider install a dispenser with fuel management capabilities as part of the fuel contract?
ONSITE BENEFITS
There is a plethora of reasons to consider an onsite fuel station. Among them:
- Ease of use: Having a bulk tank and a dispenser allows access to fuel 24/7.
- Pricing: A propane provider can deliver 2,000 to 15,000 gallons per delivery depending on the size of the bulk tank versus vehicle-to-vehicle fueling, which is time consuming and laborious for the propane provider. That savings is passed on to the fleet operator.
- Tax incentives: An onsite propane fueling station qualifies your fleet for tax incentives.
- Per-gallon federal excise tax credit: A $0.376 per gallon tax rebate is available to fleets that install onsite fueling infrastructure and fuel their vehicles from it even if the propane provider supplies the equipment at no out-of-pocket expense.*
(*The current tax credit expired in December 2021. The Build Back Better plan includes a five-year extension that has yet to pass.)
RELIABLE SUPPLY
As mentioned, the United States has a huge supply of propane. The nation produces 28 billion gallons of propane annually and only uses 8 billion of those gallons domestically. Working with a propane provider that owns its own supply division ensures a fleet manager’s peace of mind that there will never be an interruption in service.
From abundant supply to reduced emissions and cost, propane autogas makes a lot of sense for work truck fleets. You can tap into those benefits by negotiating a contract that includes long-term pricing and fueling infrastructure.
ABOUT THE AUTHORS
Crystelle Markley is the marketing director for Superior Energy Systems where she plans and oversees all marketing efforts including communications and public relations. She has worked in propane technology since 2006, leading the launch of multiple alternative fuel vehicle and infrastructure products. Derek Whaley is the business development manager, eastern region for ROUSH CleanTech. Since 2013, he has educated school districts, transit agencies, commercial companies, industry partners, and the public on the benefits of implementing advanced clean fuel vehicles into transportation fleets. Chris Ransom, national account manager for Amerigas, also assisted with content. Find out more, visit www.propane.com.
