This Little Company Solves the Big Problem With Natural Gas Trucks (XOM, ECAU, CLNE, WM)

Despite the fact that Clean Energy Fuels Corp. (NASDAQ:CLNE) is developing the nation's first natural gas (refueling) highway, and despite the fact that a major company like Waste Management, Inc. (NYSE:WM) has clearly made natural gas-powered vehicles a preference, Ken Cohen of Exxon Mobil Corporation (NYSE:XOM) was still ultimately right back in 2012 when he opined that natural gas - even energy-dense liquefied natural gas - was simply too cost prohibitive to facilitate widespread adoption where it counted the most.... for non-fleet, passenger type vehicles. Enter Echo Automotive (OTC:ECAU).

Still called Canterbury Resources (the pre-merger name) in some circles, Echo Automotive brings a cost-effective and viable solution to car and truck fleet managers who want to improve the fuel efficiency of their fleets, but don't have an extra $40,000 or so to acquire a natural gas-driven automobile.

To give credit where it's due, Clean Energy Fuels Corp. has cleared one of the biggest hurdles the natural gas auto industry has been forced to deal with... a lack of infrastructure. As of the end of last year, CLNE had established about 70 spots along America's highways - at gas stations - where natural gas-powered long-haul trucks can top off their natural gas tanks just as easily as traditional, tractor trailers can fill up with diesel. The company further reports that 70 to 80 more such refueling points are in the works. These stations offer the proverbial "good stuff" too - liquefied natural gas, which is much more energy-dense than compressed natural gas (or CNG)... the more commonly used natural gas storage process.

And if there's any doubt that natural gas lacks viability beyond academic, theoretical purposes, one only needs to look at Waste Management, Inc. The garbage-hauling organization has nearly 50 compressed natural gas refilling stations in operation right now to power its fleet of 1700 CNG and liquefied natural gas (LNG) garbage trucks. Even though most of the Waste Management natural gas infrastructure is designed for less-efficient compressed natural gas trucks, it's still well worth the company's time and expense. One 'fill up' of CNG for a WM truck can keep the truck running for 10 to 12 hours... enough to run an entire waste-collection route, and circumvent to use about 70 gallons' worth of diesel fuel.

It all sounds brilliant on the surface, leading investors and consumers alike to ask why more cars and trucks aren't being powered by natural gas. Exxon Mobil's Ken Cohen has the answer... it's still not worth it.

In this stance penned in March of 2012, Cohen explains that natural gas powered passenger cars cost about $5000 more than the equivalent car powered by a combustion engine. A CNG-driven tractor trailer costs about $60,000 more than a diesel-powered tractor trailer. A compressed natural gas filling station costs at least another $300,000 more than a gasoline refueling station, and can cost up to $3 million more (and CNG isn't even the top-of-the-line technology needed to make long-haul natural gas trucks viable. Liquefied natural gas is needed to do that, and those pumps cost even more.)

Yes, natural gas may cost $1.00 to $1.50 less per gallon - on an equivalency basis - than gasoline, but the initial costs are still stifling, and are still being passed along to fleet managers. Thing is, companies like Waste Management can afford those higher costs. General consumers and even managers of small fleets of pickup trucks can't afford the big upfront costs associated with natural gas-powered autos. Or, they couldn't afford them until now.

The EchoDrive System from Echo Automotive (or Canterbury Resources, depending on) isn't a natural gas system at all, completely alleviating the need - and expense - of a natural gas refueling center. Rather, the EchoDrive system is a battery powered add-on that assists a conventional combustion engine in turning the wheels. By lightening the proverbial load, the gas mileage for a light truck using Echo Automotive's EchoDrive can soar, improving by 50%. In other words, a truck getting 15 miles to the gallon can get 22 miles to the gallon with an EchoDrive installed.

It's the price, however, that really puts natural gas engines back into a questionable light. To convert an existing pickup truck with an EchoDrive system only costs about $10,000. That's still not chump change, but for small fleet managers of most companies, that's very affordable. And, it pays for itself in about 3 years. For most natural gas powered autos, the turnaround time on the extra investment can be 5 to 8 years (which is often longer than the vehicle is intended to be held).

Better still: Echo Automotive's EchoDrive system can operate independently of the truck's original engine, powering it by battery in the even of an engine failure. Likewise, in the unlikely event of the EchoDrive system failing, the truck's original engine can still propel the car until a repair on the EchoDrive can be made. It's an assurance that the fleet managers at Waste Management don't have. If a natural gas powered automobile breaks down, it's completely useless until a repair is made.

Bottom line: Investors need to take note of ECAU, because consumers are starting to take note of EchoDrive. It stacks up pretty well (and in some ways better) when compared to some of the other automobile propulsion systems out there.