The Ins and Outs of Becoming an LPG/CNG Contractor

The sale of petroleum dispensing systems to fleet owners has long been a significant segment of business for most petroleum equipment contractors.

The sale of petroleum dispensing systems to fleet owners has long been a significant segment of business for most petroleum equipment contractors. Because of two federal laws—the 1990 Clean Air Act Amendments (CAAA) and the Energy Policy Act (EP Act) of 1992—these same fleet owners have been mandated to acquire alternative fuel vehicles.

A reason to use alternative fuels
These fleet owners may also be eligible for significant tax deductions for both the alternative fuel vehicles and alternative fueling stations for servicing them. Small wonder that many fleet owners are interested in purchasing and installing alternative fueling systems.

Which alternative fuels will satisfy these regulations? The US Department of Energy has classified the following fuels as “alternative” to gasoline: Biodiesel, Electric Fuel, Ethanol, Hydrogen, Methanol, Compressed Natural Gas (CNG), Liquefied Natural Gas (LNG), Propane (LPG), P-Series fuels (blends of ethanol, methyltetrahydrofuran, pentanes and butane) and solar energy.

Because of fuel costs, fuel efficiency and vehicle availability, LPG and CNG systems make up approximately 90 percent of the alternative fueling systems installed today. Therefore, petroleum equipment contractors may want to add them to their lists of products and services.

Several items need to be considered in deciding whether to become an LPG/CNG contractor. First, determine if there is a market in your geographical area that makes this worthwhile. Who will make up your customer base, and is the base large enough?

A very good source for information on existing LPG and CNG fueling sites is the Department of Energy’s Alternative Fuels Data Center (AFDC) (www.afdc.doe.gov). At this Center, you can check a geographical area by an exact address, by city or state and by the type of alternative fuel. The Center also gives the total of existing sites for all 50 states. (see Table 1). Also check out the Petroleum Equipment Institute (PEI) web site (www.peinet.org) for alternative fuels to determine what’s happening throughout the country.

What you need to know next
Ask your fleet manager customers and potential customers, especially the larger fleets, what they have done already or plan to do. Identify your competition. When calling managers of larger fleets that already have alternative fuel facilities, find out who installed them. Many may have been installed by general mechanical contractors, or out-of-state alternative fuel contractors. Some utility companies are even installing systems with their own personnel.

Next, become familiar with the safety risks and determine if your insurance premiums will be affected. Talk to fire officials in your area. Find out the specific codes that apply in your area. Find out the distance requirements between LPG/CNG fueling sites and gasoline fueling sites. Learn the permit procedure. In many cases, a special permit is required for the vehicles and for the fueling station.

LPG consists mainly of propane, propylene, butane and butylene in various mixtures. Although it is a gas at normal temperatures and pressures, it is liquefied under elevated pressures and, therefore, transported and stored as a liquid in cylinders and tanks. Since strong tank construction is required, there is a pressure hazard, although it is a lot less than with CNG. LPG is extremely volatile, and LPG fires burn twice as hot as gasoline fires.

Natural Gas is neither corrosive nor toxic; its ignition temperature is high. It is lighter than air and has a narrow flammability range. CNG is, therefore, safer than other fuel sources. Natural gas must be stored in either a compressed gaseous state (CNG) or in a liquefied state (LNG). CNG is compressed to 2,400-3,600 pounds per square inch in specially designed cylinders. LNG is cooled to - 259 degrees F and stored in insulated tanks. The main hazard of CNG is the high pressure involved with its storage.

Monroe and Monroe Insurance Company (Arlington, Texas) specializes in insuring petroleum equipment contractors throughout the country. When asked what would happen if a policy holder added LPG or CNG systems to its services, Fred Monroe said that, most often, premiums would not be increased.

Talk to your insurance carrier before you decide to take on any additional services. Make sure your carrier knows what you are talking about because it is the “unknown” that can really increase your insurance premiums. That is why it is important to find a carrier that is familiar with the petroleum industry.

Third, check into sources of equipment to include dispensers, tanks, hoses, and valves/fittings. Rather than trying to name them all here, I suggest you research the Petroleum Equipment Institute directory under the listings: Dispensing Systems CNG/LPG; Pumps, LPG; and Valves and Fittings, CNG Applications. Also, talk to your existing suppliers. They, like you, may be adding alternative fuel items to their lists of available products.

Counting the cost
According to the Alternative Fuels Data Center, the cost of an LPG facility station is similar to, or even slightly lower than, a comparably sized gasoline dispensing system. On the other hand, the cost for a CNG system to handle public or private fleets can be $250,000 or as much as $3 million for a bus fleet. A CNG compressor station typically costs $2,000 to $4,000 per vehicle in the fleet. There are CNG compressor fueling systems for use with a single vehicle in a private home that average about $3,500.

Finally, determine if you have the personnel needed and find out what training is available. If you already have tank installation crews, they, more than likely, can be utilized for your LPG/CNG installations. As far as training, when you are talking to potential equipment suppliers, ask them what training and/or field assistance they can provide. By following these key recommendations, contractors will be able to reasonably assess whether alternative fuel contracting will be a good fit for them.

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