UPS Buying 285 Natural-Gas Trucks for Deliveries

United Parcel Service Inc. will purchase 285 more natural-gas-powered trucks in 2014, covering every new heavy-duty vehicle purchased for its small-package delivery business, its chief operating officer said.

The purchases will build on a previously announced buy of 700 natural-gas trucks, David Abney, the Atlanta-based company’s chief operating officer, said in an interview. UPS sees liquefied and compressed natural gas as a “bridge fuel” over the next decade, he said.

“The economics drive it, the availability of the fuel drives it,” Abney said. “When you look at the overall number for the domestic small-package business, we’re not going to be buying any conventional tractors next year.”

UPS is also building nine additional natural-gas filling stations, Abney said. Three will be in Tennessee, which has a favorable regulatory environment and a year-round supply of natural gas available for transportation, he said.

Recent tests have allayed company qualms about limitations of LNG engines for long-distance trucking, Abney said. A model made by Volvo’s Mack Trucks with a Cummins engine is meeting UPS’s expectations, he said. UPS has 112 long-distance LNG heavy-duty trucks on the road, he said.

The natural-gas truck purchases are part of the company’s environmental sustainability effort, Abney said. The world’s largest package-delivery company is also vowing to reduce diesel soot emissions 75 percent by 2020 and smog-forming nitrogen oxides by 60 percent.

The company’s alternative-fuel trucks have logged 300 million miles since 2001, with a goal of reaching 1 billion by 2017. Through better information, route planning and telematics, UPS trucks drove 364 million fewer miles between 2001 and 2012, Abney said.

UPS fleets travel about 2.9 billion miles a year, company spokeswoman Kara Gerhardt Ross said.

Natural-gas supply in the U.S. has reduced costs and opened up a gap with diesel, which averaged $3.84 per gallon the week of June 17, according to the U.S. Agriculture Department. Natural gas for trucks costs at least 15 percent less than gasoline or diesel, according to investor T. Boone Pickens, chairman and chief executive officer of BP Capital, who is backing the switch.

UPS’s Abney delivered remarks at the Alternative Clean Transportation Expo in Washington before an appearance before the House Transportation and Infrastructure Committee.

U.S. tax policies include penalties for companies like UPS that are “trying to do the right thing,” Abney said. A 12 percent federal excise tax on new trucks hits natural-gas vehicles particularly hard, since they may cost up to $100,000 more than a diesel-powered truck, he said. Natural-gas vehicles are 1 1/2 to 3 times as expensive as a conventional truck, he said.

“We should not be penalized for trying to make a difference,” Abney said.

The company has a global delivery fleet of 96,037 cars, vans, tractors and motorcycles. It has 1,016 CNG-powered package cars and 112 LNG-fueled tractors in use in the U.S., said Andy McGowan, a company spokesman.

UPS now operates 2,723 alternative-fuel and alternative-technology vehicles, he said. The 285 additional natural-gas-powered tractors and nine fueling stations the company has planned represent an investment of $75 million, McGowan said.