FedEx truck fleets to shift to natural gas from diesel


HOUSTON -- Truck fleets are likely to make a major shift to natural-gas fuels and away from diesel over the next decade, with FedEx Corp. a likely adopter, said Frederick W. Smith, chairman and CEO of the shipping company.

In an interview with The Wall Street Journal, Mr. Smith said he expects between 5% and 30% of US long-distance trucking to be fueled by compressed or liquefied natural gas over 10 years, as the cost of the trucks declines and fueling stations become more common.

"If you'd asked me three years ago, I'd have said this is very tough, because the infrastructure wasn't there," he said.

But now, the company is testing four trucks -- two using liquefied gas and two using compressed gas -- and if those work well the company will look to moving more of its 90,000 motorized vehicles to the fuel, Mr. Smith said, adding, "We'd be remiss if we didn't."

Whether the company will make "a big conversion or wait until the economics make sense," he said, will depend in large part on the cost of tractor-trailer trucks. Right now those that use liquefied natural gas remain significantly above those that use diesel, he said, at about $175,000 to $180,000 versus about $105,000 for traditional models.

Though Memphis, Tenn.-based FedEx is famous for its planes, the company's ground-delivery business has been growing rapidly, Mr. Smith said, as jet-fuel costs soared from 67 cents/gal in 2001 to more than $3/gal today. Hundreds of FedEx's lighter vehicles are now electric or hybrids.

The company has been working to make its fleet more energy efficient, announcing earlier this week that fuel economy for its fleet of vehicles around the globe has improved by 22% from 2005. It plans to hit a 30% reduction from 2005 levels by 2020. Last year it announced a similar goal for aircraft emissions.

Exports of natural gas, which require federal approval, have become a contentious issue in Washington. Mr. Smith said he favored exporting liquefied natural gas and even oil, as they would give the US a lever to get other countries to open their markets.

"We have so much gas," he said, "it would be foolish and at the end of the day penny-wise and pound-foolish not to export."

The company, which burns 1.5 billion gallons of diesel and jet fuel a year delivering freight and packages to 220 countries, isn't seeing any effect on fuel prices from the US energy boom. Mr. Smith said he doesn't expect to see a decline, as prices will remain set by global markets.

The growth in the global economy is likely to remain slow, he said. But the energy boom is contributing to economic activity around the US, he said, especially in energy-heavy areas such as Texas' Permian Basin and North Dakota's Bakken Shale.

"We are delivering a lot of stuff up there to the Bakken for sure," he said.

Dow Jones Newswires

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