AT&T Invests in Alternative-Fuel Vehicles for Corporate Fleet

By AMOL SHARMA

AT&T Inc. will spend up to $565 million over 10 years on alternative-fuel vehicles for its corporate fleet, the most significant investment by a U.S. company in transportation powered by natural gas.

The Dallas-based telecommunications provider will purchase 8,000 vehicles that run on compressed natural gas for its fleet of installation and repair vans, and replace about 7,100 passenger cars with hybrid-electric models.
The move expands on similar initiatives by companies like United Parcel Service Inc. and PG&E Corp., which already operate thousands of natural-gas-powered vehicles.
AT&T will begin by deploying 800 new CNG and hybrid-electric vehicles in 2009. The company says it is paying, on average, 29% more for its new vehicles than it would for gasoline-powered models, which it hopes will be offset by lower fuel costs. The company says it anticipates a positive return on its investment in a six-to-10-year timeframe.
The nonprofit Center for Automotive Research, in Ann Arbor, Mich., said the AT&T vehicles would also reduce carbon emissions by 211,000 metric tons over 10 years, equivalent to the annual emissions of 38,600 gasoline-powered passenger vehicles. The organization estimated the initiative will create or save 5,000 jobs, between manufacturing the vehicles and building and operating CNG stations. AT&T is planning to work with natural gas providers to build up to 40 new fueling stations across its operating region.
"It's good for the environment, it reduces our reliance on foreign oil ... and it gives a big boost to America's alternative-fuel industry," AT&T Chief Executive Randall Stephenson said in a speech Wednesday at the Economic Club of Washington, D.C.
At a time when green initiatives are fashionable, the move comes as President Barack Obama is proposing that the federal government invest billions of dollars annually into renewable energy sources and technology to make cars and trucks more fuel-efficient. The economic stimulus package includes $300 million for federal procurement of fuel-efficient vehicles like hybrids for government fleets.
There are only about 110,000 natural-gas vehicles on the road in the U.S., a sliver of the overall auto market, though there are 10 million vehicles world-wide. The general market for CNG cars is limited by their shorter range and high cost and a dearth of filling stations. In addition, the total fuel savings for the number of miles a typical consumer might drive is relatively modest.
Real-time pricing on natural gas isn't collected, but a comparison of fuel prices in an October Department of Energy report had the average gasoline price at $3.04 per gallon nationally, while natural gas was $2.01 per gallon equivalent. Since then, the prices of both fuels have fallen.
But CNG is gaining traction as an alternative fuel for fleets like delivery trucks and buses, which are in service constantly and rack up a lot more mileage. UPS recently added 300 new CNG delivery trucks to its fleet, bringing its total to over 1,800. AT&T's CNG vehicles would amount to about 10% of the company's vehicle fleet.
Building fueling stations is one of the costlier elements of natural-gas infrastructure. Tim Harden, president of supply chain and fleet operations at AT&T, said the company is discussing ways to share its fueling stations with other companies, including UPS and PG&E.
T. Boone Pickens, the 80-year-old billionaire oilman who is pushing a plan in Washington to reduce U.S. imports of foreign oil, applauded AT&T's move and said he knows of more U.S. companies that may follow suit, but declined to name them.
"There are other batters in the game, and they'll be coming to the plate," Mr. Pickens said in an interview. Mr. Pickens, who has interests in wind and solar power, is lobbying for more government investment in natural gas and a modernized energy grid.
AT&T said Ford Motor Co. will be its initial vendor, making the vehicle chassis. AT&T will work with domestic suppliers to convert the chassis to run on CNG.—Russell Gold contributed to this article.
Write to Amol Sharma at amol.sharma@wsj.com