MPC-364 January 1, 2012 December 31,2012

MPC-364 January 1, 2012 – December 31,2012 Project Title: Do Changing Prices Portend a Shift in Fuel Consumption, Diminished Greenhouse Gas Emissions,...
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MPC-364 January 1, 2012 – December 31,2012 Project Title: Do Changing Prices Portend a Shift in Fuel Consumption, Diminished Greenhouse Gas Emissions, and Lower Fuel Tax Revenue? University: Utah State University Principal Investigators: Kevin Heaslip Ph.D. (PI) Assistant Professor (Utah State University) [email protected] (435)797-8289

Ryan Bosworth Assistant Professor (Utah State University) [email protected] (435)797-0594

Research Needs: With oil prices rising it is natural for drivers to conserve funds by driving less and/or purchasing more fuel-efficient vehicles. Two immediate effects of reduced fuel usage are the reduction in fuel tax revenue, which makes budgeting more challenging, and lower GHG emissions, which is a goal of WSDOT. Natural gas vehicles and electric vehicles are attractive substitutes for petroleum powered vehicles. The lower prices of natural gas and electricity make them cost effective for potential buyers and the reduced levels of green house emissions from these alternatives gives the consumer the ability to contribute to climate change goals. One item of key importance is the degree to which consumers and suppliers respond both to price changes and to a changing regulatory environment. Forecasting changes in natural gas usage in vehicles over time is complicated by the fact that consumers cannot easily, given the current infrastructure, switch fuel types in response to short-run price changes. Price and regulatory changes can therefore have sharply different short- and long-run effects. Current research indicates, for example, that increased gasoline prices lead to a reduction in VMT in the short run and to the purchase of more fuel-efficient vehicles. A key feature of the proposed study will be to assess the degree to which price can be expected to result in increased use or adoption of CNG or electric vehicles. Research Objectives: New drilling and recovery techniques have resulted in a dramatic increase in the amount of recoverable natural gas and a consequent decrease in natural gas prices. Because natural gas can substitute for some uses of oil and gasoline it raises the possibility that rising petroleum prices may not diminish VMT to the degree assumed by some models. The proposed research would include the following tasks:

Objective 1 - Document the increased availability of natural gas for transportation in Washington. Objective 2 - Assess the extent to which natural gas is likely to substitute for petroleum (in particular the extent to which natural gas substitutes for petroleum as a transportation fuel). Objective 3 - Estimate the extent that price and performance effects will influence VMT trends in Washington State. Objective 4 - Estimate changes in GHG emissions in Washington State that would result from increased use of natural gas as a direct transportation fuel. GHG emissions associated with natural gas used in power generation to support EVs and PHEVs will also be estimated. Objective 5 - Estimate potential loss of fuel tax revenue attributable to substitution of natural gas and electricity for petroleum fuels. Research Methods: Task 1 — Document the increase in supply of natural gas, estimate future price, and availability Review the technological change in natural gas extraction and what affect it has had on the wholesale price of natural gas. Use current research to identify the recent trend. Task 2 — Assess the extent to which natural gas is likely to substitute for petroleum Estimate the price differential necessary to induce a shift from petroleum fuels to CNG, EVs, and PHEVs. Estimate the rate at which substitution of CNG for petroleum fuel, is likely to occur. Then use the state of Utah as a case study for an aggressive implementation of a natural gas network. Natural gas may compete with petroleum as a vehicle fuel. For this to occur several things are necessary: 1) An increase in the availability of natural gas fueling stations 2) An increase in the availability of natural gas vehicles Task 3 — Estimate the extent to which price and performance effects will influence VMT trends in Washington State Future trends in VMT will depend on changes in gasoline prices, changes in automotive technology, and consumer responses to these changes. We will then determine if there is a link between gasoline prices and National, Regional, and State trends in VMT. Task 4 — Estimate changes in GHG emissions in Washington State attributable to increased use of natural gas. This task centers on establishing a link between increased use of natural gas and these returns. To establish a point of comparison natural gas engines will be compared to the existing literature on alternative engines. We will then compare the studies that have used emissions testing on operating vehicles and compare with estimate of carbon emitted per powered unit and evaluate the efficiencies created by natural gas adoption as both as replacement for hybrid engines and a compliment to these engines. Task 5 — Estimate potential loss of fuel tax revenue attributable to substitution of natural gas for petroleum fuels. The switch to natural gas and EVs/PHEVs poses a threat to state transportation revenues because in Washington State natural gas and electricity are not taxed as transportation fuels.

Task 6 — Final Report The research team will prepare the final report of the project, which will document the entire research effort. The research team will also work closely with WSDOT, and will actively seek the input of the engineering, planning, economist and decision maker communities to ensure that the final product satisfies the needs of all stakeholders. Expected Outcomes:  Construct an industry analysis for wholesale natural gas and its various products for the different regions of the United States.  Natural gas infrastructure report  Market for petroleum report  A detailed model of VMT response to petroleum prices in the State of Washington and accompanying report will be provided.  Forecast the effect of current CAFE standards on the efficiency of vehicle engines over the project’s time lines.  Evaluate Reductions in GHG by natural gas and EVs/PHEVs.  Using material collected for tasks 1-4, provide forecasts over mid and long-term horizons. Include the effect on fuel tax revenue created by an expected increase use of natural gas vehicles. Include assumptions of inflation given no policy change.  Publicize the development of the guide Relevance to Strategic Goals: By studying petroleum alternatives, we are promoting the reduction of green house gasses and making our communities more livable. In addition, we are studying ways to make transportation more economical for consumers, producers and the state by addressing the issue of tax revenue with decreased petroleum use. Educational Benefits: With this project, there is a plan to hire XX research assistants on both the graduate and undergraduate levels. This will also allow there to be a cross between disciplines for students to understand not only transportation or economics and business. Work Plan:  Conduct an extensive review of literature on petroleum and alternative fuel sources and what the environmental and economic impacts of both are.  Assess the likelihood of natural gas replacing petroleum-based fuels in the near future  Assess how performance and price will effect VMT in Washington State.  Assess the emissions of GHG due to alternative fuel vehicle usage.  Assess the impact this will have on state revenue from reduced fuel tax revenue.  Produce a guide that can easily be understood by both policy makers and technical experts.  Produce a final report that will document all research findings. Project Cost: Total Project Costs: $200,000 MPC Funds Requested: $100,000 Matching Funds: $ $100,000

Source of Matching Funds: WSDOT

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